UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended March 31, 2018
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________ TO _____________
Commission File Number 333-214274
RELIANT HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Nevada | 47-2200506 |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) |
incorporation or organization) | |
12343 Hymeadow Drive, Suite 3-A Austin, Texas |
78750 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (512) 407-2623
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, 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). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ |
Non-accelerated filer ☐ | Smaller reporting company ☐ |
Emerging growth ☒ |
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 ☒
State the number of shares of the issuer’s common stock outstanding, as of the latest practicable date: 14,585,000 shares of common stock are issued and outstanding as of May 11, 2018.
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Reliant Holdings, Inc. and Subsidiary
Notes to the Consolidated Financial Statements
For the three months ended March 31, 2018 and 2017
Note 1. The Company and Summary of Significant Accounting Policies
The Company
Reliant Holdings, Inc. (the “Company”) was formed as a Nevada corporation on May 19, 2014. On May 23, 2014, Reliant Holdings, Inc., along with Reliant Pools, Inc., formerly Reliant Pools, G.P., which was formed in September 2013 (“Reliant Pools”) and the shareholders of Reliant Pools, entered into an Agreement for the Exchange of common stock whereby Reliant Pools, Inc. became a wholly-owned subsidiary of Reliant Holdings, Inc. Reliant Holdings, Inc. designs, and installs swimming pools. The Company is headquartered in Austin, Texas.
Basis of Presentation
The financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).
The consolidated financial statements and related disclosures as of March 31, 2018 are unaudited, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations. In our opinion, these unaudited financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair statement of the results for the interim periods. These unaudited financial statements should be read in conjunction with the audited financial statements of the Company for the years ended December 31, 2017 and 2016 included in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on April 13, 2018. The results of operations for the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for the full year.
New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-9, “Revenue from Contracts with Customers.” The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under the new guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-9 by one year. As a result, the amendments in ASU 2014-9 are effective for public companies for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Additional ASUs have been issued that are part of the overall new revenue guidance, including: ASU No. 2016-8, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU No. 2016-10, “Identifying Performance Obligations and Licensing,” and ASU 2016-12, “Narrow Scope Improvements and Practical Expedients.”
The new revenue recognition standard prescribes a five-step model that focuses on transfer of control and entitlement to payment when determining the amount of revenue to be recognized. The new model requires companies to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time for each of these obligations. We adopted the requirements of the new standard effective January 1, 2018 and used modified retrospective adoption approach.
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The impact to our results is not material because the analysis of our contracts under the new revenue recognition standard supports the recognition of revenue over time under the cost-to-cost method for our construction contracts, which is consistent with our current revenue recognition model. Our construction contracts will continue to be recognized over time because of the continuous transfer of control to the customer as all of the work is performed at the customer’s site and therefore, the customer controls the asset as it is being constructed. Under the new standard, the cost-to-cost measure of progress continues to best depict the transfer of control of assets to the customer, which occurs as we incur costs. In addition, the number of performance obligations under the new standard is not materially different from our contract segments under the existing standard. Lastly, the accounting for the estimate of variable consideration is not materially different compared to our current practice.
Note 2. Accounts Receivable
Accounts receivable consisted of the following: | ||||||||
March 31, | December 31, | |||||||
2018 | 2017 | |||||||
Contract receivables | $ | 370 | $ | 570 | ||||
Less: Allowance for doubtful accounts | — | — | ||||||
$ | 370 | $ | 570 |
The Company recognized bad debt expense of $0 and $0 respectively, during the periods ended March 31, 2018 and December 31, 2017.
Note 3. Contracts in Process
The net asset (liability) position for contracts in process consisted of the following: | ||||||||
March 31, | December 31, | |||||||
2018 | 2017 | |||||||
Costs on uncompleted contracts | $ | 195,161 | $ | 56,032 | ||||
Estimated earnings | 96,124 | 27,598 | ||||||
291,285 | 83,630 | |||||||
Less: Progress billings | (380,191 | ) | (105,003 | ) | ||||
$ | (88,906 | ) | $ | (21,373 | ) |
The net asset (liability) position for contracts in process is included in the accompanying consolidated balance sheets as follows:
March
31, 2018 | December
31, 2017 | |||||||
Costs and estimated earnings in excess of billings on uncompleted contracts | $ | — | $ | 15,088 | ||||
Billings in excess of costs and estimated earnings on uncompleted contracts | (88,906 | ) | (36,461 | ) | ||||
$ | (88,906 | ) | $ | (21,373 | ) |
Note 4. Concentration of Risk
The Company had gross revenue of $229,514 and $243,701 for the three months ended March 31, 2018 and 2017, respectively. The Company had 3 customers representing more than 10% of gross revenue, and combined 96% of revenue for the three months ended March 31, 2018.
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Note 5. Commitments
The Company leases approximately 1,000 square feet of office space in Austin, Texas. The lease was to expire in September 2017 with a monthly rent of $1,695. On September 5, 2017 and effective on September 30, 2017, the Company extended its office space lease from October 1, 2017 to September 30, 2018. In connection with the extension, the Company agreed to a rental increase to $1,745 per month.
Lease expense was $5,565 and $5,085 for the three months ended March 31, 2018 and 2017, respectively.
Note 6. Related Party Transactions
During the year ended December 31, 2017, Mr. Michael Chavez, one of the Company’s largest shareholders and former Chief Executive Officer of the Company, advanced $5,000 to the Company. The advance is due on demand, unsecured and has no stated interest rate.
Note 7. Long Term Debt
March 31, 2018 | December 31, 2017 | |||||||
Term note with a bank secured by truck, payable in monthly installments of $537, including interest at 4.35% through February 11, 2021 | $ | 17,573 | $ | 18,985 | ||||
Total long-term debt | 17,573 | 18,985 | ||||||
Less: current portion | (5,798 | ) | (5,736 | ) | ||||
Long-term debt net of current portion | $ | 11,775 | $ | 13,248 |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this Report. These factors include:
● | the need for additional funding; | |
● | our lack of a significant operating history; | |
● | the fact that our sole officer and director has significant control over our voting stock; | |
● | the loss of key personnel or failure to attract, integrate and retain additional personnel; | |
● | corporate governance risks; | |
● | economic downturns; | |
● | the level of competition in our industry and our ability to compete; | |
● | our ability to respond to changes in our industry; | |
● | our ability to protect our intellectual property and not infringe on others’ intellectual property; | |
● | our ability to scale our business; | |
● | our ability to maintain supplier relationships; | |
● | our ability to obtain and retain customers; | |
● | our ability to execute our business strategy in a very competitive environment; | |
● | trends in and the market for recreational pools and services; | |
● | lack of insurance policies; | |
● | dependence on a small number of customers; | |
● | changes in laws and regulations; | |
● | the market for our common stock; | |
● | our ability to effectively manage our growth; | |
● | dilution to existing stockholders; | |
● | costs and expenses associated with being a public company; | |
● | economic downturns both in the United States and globally; | |
● | risk of increased regulation of our operations; and | |
● | other risk factors included under “Risk Factors” below and in our latest Annual Report on Form 10-K. |
You should read the matters described and incorporated by reference in “Risk Factors” and the other cautionary statements made in this Report, and incorporated by reference herein, as being applicable to all related forward-looking statements wherever they appear in this Report. We cannot assure you that the forward-looking statements in this Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.
This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the audited financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission on April 13, 2018 (the “Annual Report”).
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Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our consolidated financial statements included above under “Part I - Financial Information” – “Item 1. Financial Statements”.
In this Quarterly Report on Form 10-Q, we may rely on and refer to information regarding the industries in which we operate in general from market research reports, analyst reports and other publicly available information. Although we believe that this information is reliable, we cannot guarantee the accuracy and completeness of this information, and we have not independently verified any of it.
Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” “Reliant”, “Reliant Holdings” and “Reliant Holdings, Inc.” refer specifically to Reliant Holdings, Inc. and its consolidated subsidiary.
In addition, unless the context otherwise requires and for the purposes of this report only:
● | “Exchange Act” refers to the Securities Exchange Act of 1934, as amended; | |
● | “SEC” or the “Commission” refers to the United States Securities and Exchange Commission; and | |
● | “Securities Act” refers to the Securities Act of 1933, as amended. |
Where You Can Find Other Information
We file annual, quarterly, and current reports and other information with the SEC. Our SEC filings are available to the public over the Internet at the SEC’s website at www.sec.gov. Information on our website is not part of this Report, and we do not desire to incorporate by reference such information herein. You may also read and copy any documents we file with the SEC at the SEC’s Public Reference Room at 100 F Street N.E., Washington, D.C. 20549. You can also obtain copies of the document upon the payment of a duplicating fee to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC like us. Copies of documents filed by us with the SEC are also available from us without charge, upon oral or written request to our Secretary, who can be contacted at the address and telephone number set forth on the cover page of this Report.
Corporate Information
Our principal executive offices are located at 12343 Hymeadow Drive, Suite 3-A, Austin, Texas 78750, and our telephone number is (512) 407-2623. Our website address is www.reliantholdingsinc.com. The information on, or that may be accessed through, our website is not incorporated by reference into this Report and should not be considered a part of this Report.
Organizational History
We were formed as a Nevada corporation on May 19, 2014. On May 23, 2014, we, along with Reliant Pools, Inc. (“Reliant Pools”) and the shareholders of Reliant Pools, entered into an Agreement for the Exchange of Common Stock (the “Exchange Agreement”). Pursuant to the Exchange Agreement, the shareholders of Reliant Pools exchanged 2.1 million shares of common stock, representing 100% of the outstanding common stock of Reliant Pools, for 2.1 million shares of our common stock (the “Exchange”). As a result of the Exchange, Reliant Pools became our wholly-owned subsidiary. The President of Reliant Pools, and its largest shareholder at the time of the Exchange was Michael Chavez, our former President. The following shares of restricted common stock were issued in connection with the Exchange: 900,000 shares of common stock to Michael Chavez, our former Chief Executive Officer and former sole director; 750,000 shares of common stock to Elijah May, our current Chief Executive Officer and sole director; and 450,000 shares of common stock to Becky Spohn, our former Controller.
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Reliant Pools was originally formed as a Texas General Partnership (Reliant Pools, G.P.) in September 2013, and was owned by Mr. Chavez, Mr. May, Ms. Spohn, and a third party, who subsequently was unable to perform the services required for him to vest his interest, which interest was subsequently terminated, leaving Mr. Chavez, Mr. May and Ms. Spohn as the sole owners of Reliant Pools, G.P. In May 2014, Reliant Pools, G.P. was converted from a Texas General Partnership to a Nevada corporation, Reliant Pools, Inc., with the same ownership as described above at the time of the Exchange.
Description of Business Operations
We, through our wholly-owned subsidiary, Reliant Pools (which has been in operation since September 2013), are an award winning, custom, swimming pool construction company located in the greater Austin, Texas market. In the future we plan to offer maintenance services for residential pools as well. We assist customers with the design of, and then construct, recreational pools which blend in with the surroundings, geometric pools which complement the home’s architecture and water features (e.g., waterfalls and negative edge pools) which provide the relaxing sounds of moving water. We won four Association of Pool & Spa Professionals (ARSP) Region 3 Design Awards for our designs in 2016 and one award in 2017. Moving forward, we plan on expanding our operations through an accretive business model in which we plan to acquire competitors in both the custom pool construction and pool maintenance/service industries locally, regionally, and nationally, funding permitting.
To date, the majority of our growth has been through referral business. We offer a wide variety of pool projects based upon price and the desires of the client. When our sales personnel meet with a prospective customer, we provide them with an array of projects from the basic pool building to more high-end projects that may include waterfalls, mason work, backyard lighting and in-ground spas to highlight the outdoor living experience.
Plan of Operations
We had a working capital deficit of $54,028 as of March 31, 2018. With our current cash on hand, expected revenues, and based on our current average monthly expenses, we do not anticipate the need for additional funding in order to continue our operations at their current levels, and to pay the costs associated with being a public company, for the next 12 months. We may require additional funding in the future to expand or complete acquisitions. The sources of this capital are expected to be equity investments, notes payable and advances from our shareholders, including Michael Chavez, our former CEO and director and one of our largest shareholders. Our plan for the next twelve months is to continue using the same marketing and management strategies and continue providing a quality product with excellent customer service while also seeking to expand our operations organically or through acquisitions as funding and opportunities arise. As our business continues to grow, customer feedback will be integral in making small adjustments to improve the product and overall customer experience. In the event we require additional funding, we plan to raise that through the sale of debt or equity, which may not be available on favorable terms, if at all, and may, if sold, cause significant dilution to existing stockholders. If we are unable to access additional capital moving forward, it may hurt our ability to grow and to generate future revenues.
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 2018 Compared to the Three Months Ended March 31, 2017
We had revenue of $229,514 for the three months ended March 31, 2018, compared to revenue of $243,701 for the three months ended March 31, 2017, a decrease of $14,187 or 5.8% from the prior period. Revenue decreased mainly due to fewer pools being completed during the current period compared to the prior period. We completed 1 pool and 2 remodels during the three months ended March 31, 2018 compared to completing 3 pools during the three months ended March 31, 2017. The decrease was due to increased competition. We recognize revenue based on the percentage that a job is complete rather than upon completion. As such total revenue recognized for each period may be different than the product of total completed pools during each period multiplied by the average pool contract price of each pool during such period, as the construction of certain pools may have started in one period and ended in another.
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We had cost of goods sold of $157,873 for the three months ended March 31, 2018, compared to cost of goods sold of $174,750 for the three months ended March 31, 2017, a decrease of $16,877 or 9.7% from the prior period.
Cost of goods sold decreased mainly due to fewer pools being completed during the current period compared to the prior period along with negotiating better steel, excavation, and gas line prices. The expenses which attributed to the decrease in cost of goods sold for the three months ended March 31, 2018, compared to the three months ended March 31, 2017, included:
Cost of Goods Sold Expense | For the Three Months Ended March 31, 2018 | For the Three Months Ended March 31, 2017 | Increase / (Decrease) | Percentage Change | ||||||||||||
Cost of decking | $ | 13,966 | $ | 24,884 | $ | (10,918 | ) | (43.9 | )% | |||||||
Plaster used in the construction of pools | $ | 4,941 | $ | 19,044 | $ | (14,103 | ) | (74.1 | )% | |||||||
Gunite used in the construction of pools | $ | 28,968 | $ | 12,580 | $ | 16,388 | 130.3 | % | ||||||||
Pool equipment used to filter and circulate the water used in our pools | $ | 43,281 | $ | 39,208 | $ | 4,073 | 10.4 | % | ||||||||
Masonry, stone and tile installed in and around our pools and coping expenses associated therewith | $ | 24,986 | $ | 15,767 | $ | (9,219 | ) | 58.5 | % | |||||||
Excavation and steel expenses | $ | 21,477 | $ | 30,206 | $ | (8,729 | ) | (28.9 | %) | |||||||
Other, including labor | $ | 20,254 | $ | 33,061 | $ | (12,807 | ) | (38.7 | %) | |||||||
Total | $ | 157,873 | $ | 174,750 | $ | (16,877 | ) | 9.7 | % |
Cost of goods sold represent our pool construction costs, including raw materials, outsourced labor, installed equipment, tile and coping expenses, excavation costs and permit expenses. We anticipate our cost of goods sold increasing in approximate proportion to increases in revenue and decreasing in approximate proportion to decreases in revenue, moving forward, as our cost of goods sold are factored into the price we charge for our pools and represent the cost of pool construction, the majority of which is not fixed and varies depending on the total number of pools and construction projects we complete during each period and the size and complexity of such projects. Labor costs associated with the cost of labor used in construction of pools decreased due to the termination of in house pool labor.
We had a gross margin of $71,641 for the three months ended March 31, 2018, compared to a gross margin of $68,951 for the three months ended March 31, 2017, an increase of $2,690 or 4% from the prior period due to the reasons described above. Gross margin as a percentage of revenue increased to 31% for the three months ended March 31, 2018, compared to 28% for the three months ended March 31, 2017. The increase in gross margin as a percentage of revenue was mainly due to a reduction in labor and material costs, especially associated with steel, gas lines, and excavation.
We had operating expenses consisting solely of general and administrative expenses of $81,161 for the three months ended March 31, 2018, compared to operating expenses consisting solely of general and administrative expenses of $123,981 for the three months ended March 31, 2017. Operating expenses decreased due to decreased payroll, decreased legal and accounting expenditures. General and administrative expenses include the salaries of our employees, commissions and the fees paid to contract employees.
We had interest income of $6 for the three months ended March 31, 2018, compared to interest income of $0 for the three months ended March 31, 2017. Interest income was in connection with interest generated by funds the Company maintained in its savings account.
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We had interest expense of $201 and $579, for the three months ended March 31, 2018 and 2017, respectively, due to interest paid in connection with the purchase of a truck used in our business, as described in greater detail under “Liquidity and Capital Resources” below.
We had a net loss of $9,715 for the three months ended March 31, 2018, compared to a net loss of $55,609 for the three months ended March 31, 2017, a decrease in net loss of $45,894, mainly due to the decrease in general and administrative expenses and the decrease in cost of goods sold, offset by the decrease in revenues, each as described above.
Liquidity and Capital Resources
We had total assets of $133,966 as of March 31, 2018, consisting of total current assets of $114,771, which included cash of $104,401, accounts receivable of $370 and federal income tax receivable of $10,000, and equipment, net of depreciation of $19,195. Federal income tax receivable relates to a $10,000 payment made by the Company to the United States Treasury in March 2016, in anticipation of Federal income tax the Company estimated would be owed at the end of the 2016 calendar year. There was no tax due for the year ended December 31, 2016 and the Company currently estimates that it will not owe regular federal income tax for the year ended December 31, 2017 and has recorded the payment as an asset as of March 31, 2018.
We had total liabilities of $180,574 as of March 31, 2018, which included total current liabilities of $168,799, consisting of accounts payable and accrued liabilities of $69,095, billings in excess of costs and estimated earnings on uncompleted jobs of $88,906, current portion of long-term note payable of $5,798 and $5,000 of related party advances relating to amounts advanced to the Company by Michael Chavez, the Company’s former Chief Executive Officer, which amount is due on demand, unsecured and has no stated interest rate, and long-term liabilities consisting of long-term note payable of $11,775, representing amounts owed in connection with the purchase of a truck used in our business.
We had a working capital deficit of $54,028 as of March 31, 2018, compared to a working capital deficit of $44,534 as of December 31, 2017, mainly due to an increase in billings in excess of costs and estimated earnings on uncompleted contracts of $52,445 and an increase in accounts payable and accrued liabilities of $27,848, offset by an increase in cash of $86,149.
We had $87,560 of net cash provided by operating activities for the three months ended March 31, 2018, which was mainly due to net loss $9,715 offset by an increase in billings in excess of costs and estimated earnings on uncompleted contracts of $52,445 and an increase in accounts payable and accrued liabilities of $27,848.
We had $1,411 of net cash used in financing activities for the three months ended March 31, 2018, which was due to payments on note payable.
As of March 31, 2018, we owed $5,798 in current portion of, and $11,775 of long-term portion of, note payable, in connection with our purchase of a Ford F-150 truck for work purposes. The note payable accrues interest at the rate of 4.35% per annum and requires that we pay $537 per month until February 2021.
We do not currently have any additional commitments or identified sources of additional capital from third parties or from our officers, directors or majority shareholders. Additional financing may not be available on favorable terms, if at all.
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In the future, we may be required to seek additional capital by selling additional debt or equity securities, or otherwise be required to bring cash flows in balance when we approach a condition of cash insufficiency. The sale of additional equity or debt securities, if accomplished, may result in dilution to our then stockholders. Financing may not be available in amounts or on terms acceptable to us, or at all. In the event we are unable to raise additional funding and/or obtain revenues sufficient to support our expenses, we may be forced to curtail or abandon our business operations, and any investment in the Company could become worthless.
Critical Accounting Policies:
Emerging Growth Company. Section 107 of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
Revenue Recognition
On January 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers (“new revenue standard”) to all contracts using the modified retrospective method. The adoption of the new revenue standard had no material impact on our condensed consolidated financial statements as it did not require a change in revenue recognition. As such, comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct.
Performance Obligations Satisfied Over Time
Revenue for our contracts that satisfy the criteria for over time recognition is recognized as the work progresses. The majority of our revenue is derived from construction contracts and projects that typically span between 4 to 12 months. Our construction contracts will continue to be recognized over time because of the continuous transfer of control to the customer as all of the work is performed at the customer’s site and, therefore, the customer controls the asset as it is being constructed. Contract costs include labor, material, and indirect costs.
Performance Obligations Satisfied at a Point in Time
Revenue for our contracts that do not satisfy the criteria for over time recognition is recognized at a point in time. Substantially all of our revenue recognized at a point in time is for work performed for pool maintenance or repairs. Unlike our construction contracts that use a cost-to-cost input measure for performance, the pool maintenance or repairs utilize an output measure for performance based on the completion of a unit of work. The typical time frame for completion of these services is less than one month. Upon fulfillment of the performance obligation, the customer is provided an invoice (or equivalent) demonstrating transfer of control or completion of service to the customer. We believe that point in time recognition remains appropriate for these contracts and will continue to recognize revenues upon completion of the performance obligation and issuance of an invoice.
Contract modifications are routine in the performance of our contracts. Contracts are often modified to account for changes in the contract specifications or requirements. In most instances, contract modifications are for goods or services that are not distinct, and, therefore, are accounted for as part of the existing contract.
Backlog
On March 31, 2018, we had approximately $357,000 of remaining performance obligations on our construction contracts, which we also refer to as backlog. We expect to recognize our backlog as revenue during the remainder of 2018.
Contract Estimates
Accounting for long-term contracts and programs involves the use of various techniques to estimate total contract revenue and costs. For long-term contracts, we estimate the profit on a contract as the difference between the total estimated revenue and expected costs to complete a contract and recognize that profit over the life of the contract.
Contract estimates are based on various assumptions to project the outcome of future events. These assumptions include labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials, and the performance of subcontractors.
12
Variable Consideration
Transaction price for our contracts may include variable consideration, which includes increases to transaction price for approved and unapproved change orders, claims and incentives, and reductions to transaction price for liquidated damages. Change orders, claims and incentives are generally not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as a modification of the existing contract and performance obligation. We estimate variable consideration for a performance obligation at the most likely amount to which we expect to be entitled (or the most likely amount we expect to incur in the case of liquidated damages), utilizing estimation methods that best predict the amount of consideration to which we will be entitled (or will be incurred in the case of liquidated damages). We include variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. The effect of variable consideration on the transaction price of a performance obligation is recognized as an adjustment to revenue on a cumulative catch-up basis. To the extent unapproved change orders and claims reflected in transaction price (or excluded from transaction price in the case of liquidated damages) are not resolved in our favor, or to the extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue. No adjustment on any one contract was material to our condensed consolidated financial statements for the three months ended March 31, 2018, and March 31, 2017.
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts (contract assets) on the consolidated balance sheet. On our construction contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., biweekly or monthly) or upon achievement of contractual milestones. Generally, billing occurs prior to revenue recognition, resulting in contract liabilities. These assets and liabilities are reported on the condensed consolidated balance sheet on a contract-by-contract basis at the end of each reporting period.
Accounts Receivable and Allowances. The Company does not charge interest to its customers and carries its customer receivables at their face amounts, less an allowance for doubtful accounts. Included in accounts receivable are balances billed to customers pursuant to retainage provisions in certain contracts that are due upon completion of the contract and acceptance by the customer, or earlier as provided by the contract. Based on the Company’s experience in recent years, the majority of customer balances at each balance sheet date are collected within twelve months. As is common practice in the industry, the Company classifies all accounts receivable, including retainage, as current assets. The contracting cycle for certain long-term contracts may extend beyond one year, and accordingly, collection of retainage on those contracts may extend beyond one year.
The Company grants trade credit, on a non-collateralized basis (with the exception of lien rights against the property in certain cases), to its customers and is subject to potential credit risk related to changes in business and overall economic activity. The Company analyzes specific accounts receivable balances, historical bad debts, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In the event that a customer balance is deemed to be uncollectible, the account balance is written-off against the allowance for doubtful accounts.
Classification of Construction Contract-related Assets and Liabilities. Costs and estimated earnings in excess of billings on uncompleted contracts are presented as a current asset in the accompanying consolidated balance sheets, and billings in excess of costs and estimated earnings on uncompleted contracts are presented as a current liability in the accompanying consolidated balance sheets. The Company’s contracts vary in duration, with the duration of some larger contracts exceeding one year. Consistent with industry practices, the Company includes the amounts realizable and payable under contracts, which may extend beyond one year, in current assets and current liabilities. The vast majority of these balances are settled within one year.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We have established and maintain a system of disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed with the Securities and Exchange Commission pursuant to the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Commission and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), to allow timely decisions regarding required disclosures.
Management, consisting of our CEO and CFO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. As of March 31, 2018, based on the evaluation of these disclosure controls and procedures, our CEO and CFO has concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our reports filed with the Securities and Exchange Commission pursuant to the Exchange Act, is recorded properly, processed, summarized and reported within the time periods specified in the rules and forms of the Commission and that such information is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting
We regularly review our system of internal control over financial reporting to ensure we maintain an effective internal control environment. There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
13
Although we may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business, we are not currently a party to any material legal proceeding. In addition, we are not aware of any material legal or governmental proceedings against us, or contemplated to be brought against us.
There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the SEC on April 13, 2018, under the heading “Item 1A. Risk Factors”, and investors should review the risks provided in the Annual Report, prior to making an investment in the Company. The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in the Annual Report, under “Item 1A. Risk Factors” and those described below, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Use of Proceeds From Sale of Registered Securities
None.
Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
None.
See the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized.
RELIANT HOLDINGS, INC. | ||
Date: May 14, 2018 | By: /s/ Elijah May | |
Elijah May | ||
Chief Executive Officer and President | ||
(Principal Executive Officer and Principal Financial/Accounting Officer) |
15
EXHIBIT INDEX
* Filed herewith.
** Furnished Herewith.
16
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Elijah May, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Reliant Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | (Paragraph omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313); |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of a Quarterly Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 14, 2018 | By: | /s/ Elijah May | |
Elijah May Chief Executive Officer and President (Principal Executive Officer and Principal Financial/Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SS. 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Reliant Holdings, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2018, as filed with the Securities and Exchange Commission (the “Report”), I, Elijah May, Principal Executive and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 14, 2018 | By: | /s/ Elijah May | |
Elijah May Chief Executive Officer and President (Principal Executive Officer and Principal Financial/Accounting Officer) |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
May 11, 2018 |
|
Document And Entity Information | ||
Entity Registrant Name | Reliant Holdings, Inc. | |
Entity Central Index Key | 0001682265 | |
Document Type | 10-Q | |
Trading Symbol | rhis | |
Document Period End Date | Mar. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 14,585,000 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2018 |
Consolidated Balance Sheets (Parenthetical) - USD ($) |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accumulated depreciation | $ 15,731 | $ 14,037 |
Common stock, par value (in dollars per share) | $ .001 | $ .001 |
Common stock, shares authorized | 70,000,000 | 70,000,000 |
Common stock, shares issued | 14,585,000 | 14,585,000 |
Common stock, shares outstanding | 14,585,000 | 14,585,000 |
Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Income Statement [Abstract] | ||
Revenue | $ 229,514 | $ 243,701 |
Cost of goods sold | (157,873) | (174,750) |
Gross Margin | 71,641 | 68,951 |
Operating Expenses | ||
General and administrative | 81,161 | 123,981 |
Total Operating Expenses | (81,161) | (123,981) |
Loss From Operations | (9,520) | (55,030) |
Other income / (expense) | ||
Interest income | 6 | |
Interest expense | (201) | (579) |
Total other income (expense) | (195) | (579) |
Loss before income taxes | (9,715) | (55,609) |
Provision for Income Tax | ||
Net Loss | $ (9,715) | $ (55,609) |
Net Loss Per Share - Basic and Diluted (in dollars per share) | $ 0 | $ 0 |
Weighted Average Common Shares Outstanding (in share) | 14,585,000 | 14,831,930 |
Consolidated Statements of Cash Flow (Unaudited) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Operating Activities | ||
Net loss | $ (9,715) | $ (55,609) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation | 1,694 | 1,693 |
Changes in operating assets and liabilities: | ||
Accounts Receivable | 200 | 3,341 |
Costs in excess of billings | 15,088 | 357 |
Billings in excess of costs and estimated earnings on uncompleted contracts | 52,445 | 40,275 |
Accounts payable and accrued liabilities | 27,848 | 13,008 |
Net Cash Provided By Operating Activities | 87,560 | 3,065 |
Investing Activities | ||
Accounts receivable, related party | (468) | |
Net Cash Used in Investing Activities | (468) | |
Financing Activities | ||
Payments on note payable | (1,411) | (1,033) |
Net Cash Used In Financing Activities | (1,411) | (1,033) |
Net change in Cash | 86,149 | 1,564 |
Cash - Beginning of Period | 42,673 | |
Cash - End of Period | 44,237 | |
Supplemental Disclosures | ||
Interest paid | $ 956 | $ 261 |
The Company and Summary of Significant Accounting Policies |
3 Months Ended |
---|---|
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
The Company and Summary of Significant Accounting Policies | Note 1. The Company and Summary of Significant Accounting Policies
The Company
Reliant Holdings, Inc. (the “Company”) was formed as a Nevada corporation on May 19, 2014. On May 23, 2014, Reliant Holdings, Inc., along with Reliant Pools, Inc., formerly Reliant Pools, G.P., which was formed in September 2013 (“Reliant Pools”) and the shareholders of Reliant Pools, entered into an Agreement for the Exchange of common stock whereby Reliant Pools, Inc. became a wholly-owned subsidiary of Reliant Holdings, Inc. Reliant Holdings, Inc. designs, and installs swimming pools. The Company is headquartered in Austin, Texas.
Basis of Presentation
The financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).
The consolidated financial statements and related disclosures as of March 31, 2018 are unaudited, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations. In our opinion, these unaudited financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair statement of the results for the interim periods. These unaudited financial statements should be read in conjunction with the audited financial statements of the Company for the years ended December 31, 2017 and 2016 included in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on April 13, 2018. The results of operations for the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for the full year.
New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-9, “Revenue from Contracts with Customers.” The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under the new guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-9 by one year. As a result, the amendments in ASU 2014-9 are effective for public companies for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Additional ASUs have been issued that are part of the overall new revenue guidance, including: ASU No. 2016-8, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU No. 2016-10, “Identifying Performance Obligations and Licensing,” and ASU 2016-12, “Narrow Scope Improvements and Practical Expedients.”
The new revenue recognition standard prescribes a five-step model that focuses on transfer of control and entitlement to payment when determining the amount of revenue to be recognized. The new model requires companies to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time for each of these obligations. We adopted the requirements of the new standard effective January 1, 2018 and used modified retrospective adoption approach.
The impact to our results is not material because the analysis of our contracts under the new revenue recognition standard supports the recognition of revenue over time under the cost-to-cost method for our construction contracts, which is consistent with our current revenue recognition model. Our construction contracts will continue to be recognized over time because of the continuous transfer of control to the customer as all of the work is performed at the customer’s site and therefore, the customer controls the asset as it is being constructed. Under the new standard, the cost-to-cost measure of progress continues to best depict the transfer of control of assets to the customer, which occurs as we incur costs. In addition, the number of performance obligations under the new standard is not materially different from our contract segments under the existing standard. Lastly, the accounting for the estimate of variable consideration is not materially different compared to our current practice. |
Accounts Receivable |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable | Note 2. Accounts Receivable
The Company recognized bad debt expense of $0 and $0 respectively, during the periods ended March 31, 2018 and December 31, 2017. |
Contracts in Process |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contractors [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contracts in Process | Note 3. Contracts in Process
The net asset (liability) position for contracts in process is included in the accompanying consolidated balance sheets as follows:
|
Concentration of Risk |
3 Months Ended |
---|---|
Mar. 31, 2018 | |
Risks and Uncertainties [Abstract] | |
Concentration of Risk | Note 4. Concentration of Risk
The Company had gross revenue of $229,514 and $243,701 for the three months ended March 31, 2018 and 2017, respectively. The Company had 3 customers representing more than 10% of gross revenue, and combined 96% of revenue for the three months ended March 31, 2018. |
Commitments |
3 Months Ended |
---|---|
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments | Note 5. Commitments
The Company leases approximately 1,000 square feet of office space in Austin, Texas. The lease was to expire in September 2017 with a monthly rent of $1,695. On September 5, 2017 and effective on September 30, 2017, the Company extended its office space lease from October 1, 2017 to September 30, 2018. In connection with the extension, the Company agreed to a rental increase to $1,745 per month.
Lease expense was $5,565 and $5,085 for the three months ended March 31, 2018 and 2017, respectively. |
Related Party Transactions |
3 Months Ended |
---|---|
Mar. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 6. Related Party Transactions
During the year ended December 31, 2017, Mr. Michael Chavez, one of the Company’s largest shareholders and former Chief Executive Officer of the Company, advanced $5,000 to the Company. The advance is due on demand, unsecured and has no stated interest rate. |
Long Term Debt |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Long Term Debt | Note 7. Long Term Debt
|
The Company and Summary of Significant Accounting Policies (Policies) |
3 Months Ended |
---|---|
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation
The financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).
The consolidated financial statements and related disclosures as of March 31, 2018 are unaudited, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations. In our opinion, these unaudited financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair statement of the results for the interim periods. These unaudited financial statements should be read in conjunction with the audited financial statements of the Company for the years ended December 31, 2017 and 2016 included in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on April 13, 2018. The results of operations for the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for the full year. |
New Accounting Pronouncements | New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-9, “Revenue from Contracts with Customers.” The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under the new guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-9 by one year. As a result, the amendments in ASU 2014-9 are effective for public companies for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Additional ASUs have been issued that are part of the overall new revenue guidance, including: ASU No. 2016-8, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU No. 2016-10, “Identifying Performance Obligations and Licensing,” and ASU 2016-12, “Narrow Scope Improvements and Practical Expedients.”
The new revenue recognition standard prescribes a five-step model that focuses on transfer of control and entitlement to payment when determining the amount of revenue to be recognized. The new model requires companies to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time for each of these obligations. We adopted the requirements of the new standard effective January 1, 2018 and used modified retrospective adoption approach.
The impact to our results is not material because the analysis of our contracts under the new revenue recognition standard supports the recognition of revenue over time under the cost-to-cost method for of our construction contracts, which is consistent with our current revenue recognition model. Our construction contracts will continue to be recognized over time because of the continuous transfer of control to the customer as all of the work is performed at the customer’s site and therefore, the customer controls the asset as it is being constructed. Under the new standard, the cost-to-cost measure of progress continues to best depict the transfer of control of assets to the customer, which occurs as we incur costs. In addition, the number of performance obligations under the new standard is not materially different from our contract segments under the existing standard. Lastly, the accounting for the estimate of variable consideration is not materially different compared to our current practice. |
Accounts Receivable (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accounts receivable |
|
Contracts in Process (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contractors [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of net asset (liability) position for contracts in process |
The net asset (liability) position for contracts in process is included in the accompanying consolidated balance sheets as follows:
|
Long Term Debt (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long term debt |
|
Accounts Receivable (Details) - USD ($) |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Receivables [Abstract] | ||
Contract receivables | $ 370 | $ 570 |
Less: Allowance for doubtful accounts | ||
Accounts Receivable | $ 370 | $ 570 |
Accounts Receivable (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Receivables [Abstract] | ||
Bad debt expenses | $ 0 | $ 0 |
Contracts in Process (Details) - USD ($) |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Contractors [Abstract] | ||
Costs on uncompleted contracts | $ 195,161 | $ 56,032 |
Estimated earnings | 96,124 | 27,598 |
Total | 291,285 | 83,630 |
Less: Progress billings | (380,191) | (105,003) |
Billings in Excess of Cost | (88,906) | (21,373) |
Costs and estimated earnings in excess of billings on uncompleted contracts | 15,088 | |
Billings in excess of costs and estimated earnings on uncompleted contracts | (88,906) | (36,461) |
Net liability position for contracts in process | $ (88,906) | $ (21,373) |
Concentration of Risk (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Revenue | $ 229,514 | $ 243,701 |
Customer Concentration Risk [Member] | Gross Revenue [Member] | ||
Concentration percentage | 10.00% | 10.00% |
Number of customers | 3 | |
Combined revenue concentration percentage | 96.00% |
Commitments (Details Narrative) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2018
USD ($)
|
Mar. 31, 2017
USD ($)
|
Sep. 30, 2017
USD ($)
|
Dec. 31, 2017
ft²
|
|
Commitments and Contingencies Disclosure [Abstract] | ||||
Office space (sq ft) | ft² | 1,000 | |||
Monthly lease payment | $ 1,745 | $ 1,695 | ||
Lease expense | $ 5,565 | $ 5,085 |
Related Party Transactions (Details Narrative) |
12 Months Ended |
---|---|
Dec. 31, 2017
USD ($)
| |
Michael Chavez (Chief Executive Officer) [Member] | |
Advance from related party | $ 5,000 |
Long Term debt (Details) - USD ($) |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt Disclosure [Abstract] | ||
Term note with a bank secured by truck, payable in monthly installments of $537, including interest at 4.35% through February 11, 2021. | $ 17,573 | $ 18,985 |
Total long-term debt | 17,573 | 18,985 |
Less: current portion | (5,798) | (5,736) |
Long-term debt, net of current portion | $ 11,775 | $ 13,248 |
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