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NOTES
TO FINANCIAL STATEMENTS
For
the Years Ended November 30, 2022 and 2021
NOTE
1 – NATURE OF OPERATIONS
ORGANIZATION AND NATURE OF BUSINESS
Renewable
Innovations, Inc., a Delaware corporation (“we,” “us,” “our,” “Renewable,” or the “Company”),
was incorporated in 2019 and commenced operations in 2021.
Renewable’s
goal is to accelerate the growth and opportunities within the renewable economy. Our team of industry leaders brings extensive experience
and connections across the Renewable, Hydrogen, and Alternative Energy sectors.
Our advanced power integration, applications, and solutions are focused on creating a new Hydrogen-powered energy economy:
|
● |
Hydrogen
Fuel Cell (HFC) scalable backup and primary power systems |
|
● |
Mobile
and transportable HFC-powered EV Rapid Charge systems for the Electric Vehicle market to help close the Grid Gap (TM) |
|
● |
Advanced
Hydrogen transport and refueling vehicles |
|
● |
Greenhouse
Grids to power communities |
Our
customers include government agencies and leading Fortune 500 companies.
Upon
formation of the Company, the common shares authorized was 10,000. In May 2021, 2,000 common shares were issued to Robert Mount and Lynn
Barney, the Company’s founders. On May 13, 2021, the articles of incorporation were amended to increase the authorized common shares
to 1,000,000, in addition to authorizing the preferred stock discussed above. Upon the filing of the amended articles of incorporation,
the common shares were subject to a 250-for-1 forward stock split; thus, increasing the common shares outstanding to 500,000 shares.
NOTE
2 – RESTATEMENT FOR CORRECTION OF AN ERROR
In
preparation of the first quarter 2023 financial statements, management recognized potential errors in prior-period accounting. After
reviewing the accounting records, management determined two main errors occurred in the reported fiscal year 2022 financial records.
The
first error management found was that raw materials within inventory was overstated; therefore, the restated balance sheet dated November
30, 2022, shows a reduction in inventory.
The
second error was realized while reviewing the accounting records related to cost of sales recorded in the wrong period. Management determined
that certain inputs used to estimate percent complete for in-progress projects were also incorrect and certain expenses were erroneously
classified in fiscal year ended November 30, 2022. After correcting these errors, the amount of revenue was reduced, contract assets
decreased, contract liabilities increased, and certain expenses and cost of sales were revised for the year ended November 30, 2022.
Management
has been assessing their internal controls and working to improve the design and implementation of those internal controls in an effort
to prevent such misstatements from occurring in the future.
SCHEDULE OF RESTATEMENT
The
income statement for the year ended November 30, 2022 was restated as follows:
| |
As Previously Reported | | |
Restatement Adjustment | | |
As Restated | |
Sales | |
$ | 3,468,587 | | |
$ | (1,038,393 | ) | |
$ | 2,430,194 | |
| |
| | | |
| | | |
| | |
Cost of sales | |
| 2,578,368 | | |
| (20,554 | ) | |
| 2,557,814 | |
Gross profit (loss) | |
| 890,219 | | |
| (1,017,839 | ) | |
| (127,620 | ) |
| |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | |
Sales, general, and administrative | |
| 598,029 | | |
| 391,887 | | |
| 989,916 | |
Depreciation | |
| 358,878 | | |
| (1,551 | ) | |
| 357,327 | |
Total operating expenses | |
| 956,907 | | |
| 390,336 | | |
| 1,347,243 | |
| |
| | | |
| | | |
| | |
Loss from operations | |
| (66,688 | ) | |
| (1,408,175 | ) | |
| (1,474,863 | ) |
| |
| | | |
| | | |
| | |
Other income (expense): | |
| | | |
| | | |
| | |
Rental income | |
| 84,900 | | |
| - | | |
| 84,900 | |
Settlement expense | |
| (983,500 | ) | |
| - | | |
| (983,500 | ) |
Gain on settlement | |
| 20,450 | | |
| - | | |
| 20,450 | |
Total other income (expense) | |
| (878,150 | ) | |
| - | | |
| (878,150 | ) |
| |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
Income tax expense | |
| 100 | | |
| - | | |
| 100 | |
| |
| | | |
| | | |
| | |
Net loss | |
$ | (944,938 | ) | |
$ | (1,408,175 | ) | |
$ | (2,353,113 | ) |
The
balance sheet as of November 30, 2022 was restated as follows:
| |
As Previously Reported | | |
Restatement Adjustment | | |
(Restated) | |
ASSETS | |
| | | |
| | | |
| | |
Current assets | |
| | | |
| | | |
| | |
Cash | |
$ | 1,260,199 | | |
$ | - | | |
$ | 1,260,199 | |
Accounts receivable, net of allowance of $7,500 and $0 | |
| 74,167 | | |
| - | | |
| 74,167 | |
Inventories | |
| 510,318 | | |
| (163,111 | ) | |
| 347,207 | |
Prepaid expenses | |
| 584,132 | | |
| - | | |
| 584,132 | |
Contract asset | |
| 222,395 | | |
| (178,867 | ) | |
| 43,528 | |
Total current assets | |
| 2,651,211 | | |
| (341,978 | ) | |
| 2,309,233 | |
| |
| | | |
| | | |
| | |
Property and equipment, net | |
| 2,563,766 | | |
| - | | |
| 2,563,766 | |
| |
| | | |
| | | |
| | |
Deposits | |
| 35,000 | | |
| - | | |
| 35,000 | |
| |
| | | |
| | | |
| | |
Right of use asset | |
| 4,239,676 | | |
| - | | |
| 4,239,676 | |
Total assets | |
$ | 9,489,653 | | |
$ | (341,978 | ) | |
$ | 9,147,675 | |
| |
| | | |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
Current liabilities | |
| | | |
| | | |
| | |
Accounts payable | |
$ | 627,976 | | |
$ | - | | |
$ | 627,976 | |
Accrued payroll liabilities | |
| 70,973 | | |
| - | | |
| 70,973 | |
Other current liabilities | |
| - | | |
| - | | |
| - | |
Contract liabilities - customer deposits | |
| 1,776,159 | | |
| 1,066,197 | | |
| 2,842,356 | |
Lease liability - current portion | |
| 475,195 | | |
| - | | |
| 475,195 | |
Total current liabilities | |
| 2,950,303 | | |
| 1,066,197 | | |
| 4,016,500 | |
| |
| | | |
| | | |
| | |
Noncurrent liabilities | |
| | | |
| | | |
| | |
Lease liability, net of current portion | |
| 3,876,145 | | |
| - | | |
| 3,876,145 | |
Total liabilities | |
| 6,826,448 | | |
| 1,066,197 | | |
| 7,892,645 | |
Stockholders’ equity | |
| | | |
| | | |
| | |
Common stock, par value $.001, 1,000,000 shares authorized, 500,000 shares issued and outstanding | |
| 500 | | |
| - | | |
| 500 | |
Preferred A stock, par value $.001, 100,000 shares authorized, 19,148 and 10,355 issued and outstanding | |
| 19 | | |
| - | | |
| 19 | |
Additional paid-in capital | |
| 4,786,652 | | |
| - | | |
| 4,786,652 | |
Accumulated deficit | |
| (2,123,966 | ) | |
| (1,408,175 | ) | |
| (3,532,141 | ) |
Total stockholders’ equity | |
| 2,663,205 | | |
| (1,408,175 | ) | |
| 1,255,030 | |
Total liabilities and stockholders’ equity | |
$ | 9,489,653 | | |
$ | (341,978 | ) | |
$ | 9,147,675 | |
Based
on the above restatement as of and for the year ended November 30, 2022, certain disclosures in Notes 3, 4, 5, 6, 10, 11 and 13
were revised to align with the restated balances.
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use
of Estimates
We
prepare our financial statements in accordance with accounting principles generally accepted in the United States of America, which requires
management to use its judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities and related
disclosures at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. These
assumptions and estimates could have a material effect on our financial statements. Actual results may differ materially from those estimates.
We review our estimates on an ongoing basis based on information currently available, and changes in facts and circumstances may cause
us to revise these estimates. Significant accounting estimates reflected in the Company’s financial statements include allowance
for doubtful accounts, revenue recognition, contract liabilities, useful lives of property, plant and equipment and fair value of
lease liability and right of use assets, and inventory obsolescence.
Cash
Cash
consists of petty cash and checking accounts. For the purpose of the statements of cash flows, all highly liquid investments with an
original maturity of three months or less are considered cash equivalents. There were no cash equivalents as of November 30, 2022 and
2021.
The
Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits.
Accounts
Receivable
We
manage credit risk associated with our accounts receivables at the customer level. Because the same customers typically generate the
revenues that are accounted for under both Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic
606) and Accounting Standards Codification Topic 326, Credit Losses (Topic 326), the discussions below on credit risk and
our allowances for doubtful accounts address our total revenues from Topic 606 and Topic 326.
Pursuant
to Topic 326 for our accounts receivables, we maintain an allowance for doubtful accounts that reflects our estimate of our expected
credit losses. Our allowance is estimated using a loss rate model based on delinquency. The estimated loss rate is based on our historical
experience with specific customers, our understanding of our current economic circumstances, reasonable and supportable forecasts, and
our own judgment as to the likelihood of ultimate payment based upon available data. We perform credit evaluations of customers and establish
credit limits based on reviews of our customers’ current credit information and payment histories. The actual rate of future credit
losses, however, may not be similar to past experience. Our estimate of doubtful accounts could change based on changing circumstances,
including changes in the economy or in the particular circumstances of individual customers. Accordingly, we may be required to increase
or decrease our allowance for doubtful accounts. Based on management’s evaluation, accounts receivable has a balance in the allowance of doubtful accounts of
$7,500 and $0 for the years ended November 30, 2022 and 2021, respectively.
Inventory
All
inventory consists of raw materials and is valued at the lower of first-in-first-out cost or net realizable value; where net realizable
value is considered to be the estimated selling price in the ordinary course of business, less reasonably predictable cost of completion,
disposal, and transportation. Management periodically evaluates inventory for obsolescence and has determined that no
inventory is obsolete at November 30,
2022 and 2021.
Property
and Equipment
Property
and equipment are recorded at cost and depreciated using straight-line over the estimated useful lives. Ordinary repair
and maintenance costs are included in sales, general, and administrative (“SG&A”) expenses on our statements of operations.
However, expenditures for additions or improvements that significantly extend the useful life of the asset are capitalized in the period
incurred. At the time assets are sold or disposed of, the cost and accumulated depreciation are removed from their respective accounts
and the related gains or losses are reflected in the statements of operations in gains from sales of property and equipment, net.
We
periodically evaluate the appropriateness of remaining depreciable lives assigned to property and equipment. Leasehold improvements
are amortized using the straight-line method over their estimated useful lives or the remaining term of the lease, whichever is
shorter. Depreciation expense for the years ended November 30, 2022 and 2021 was $446,994 and $85,114, respectively, a portion of
which is reported in cost of sales ($89,667 and $57,029 in 2022 and 2021, respectively). Generally, we assign the following
estimated useful lives to these categories:
SCHEDULE
OF ESTIMATED USEFUL LIVES
|
Category |
|
Estimated
Useful Life |
|
Furniture and fixtures |
|
5
to 10
years |
|
Computer equipment |
|
5
to 10
years |
|
Office equipment |
|
5
to 10
years |
|
Software |
|
3
years |
|
Leasehold
improvements
|
|
7
years
|
Leases
We
determine whether an arrangement is a lease at the inception of the arrangement based on the terms and conditions in the contract. A
contract contains a lease if there is an identified asset, and we have the right to control the asset for a period of time in exchange
for consideration. Lease arrangements can take several forms. Some arrangements are clearly within the scope of lease accounting, such
as real estate contracts that provide an explicit contractual right to use a building for a specified period of time in exchange for
consideration. However, the right to use an asset can also be conveyed through arrangements that are not leases in form, such as leases
embedded within service and supply contracts. We analyze all arrangements with potential embedded leases to determine if an identified
asset is present, if substantive substitution rights are present, and if the arrangement provides the customer control of the asset.
Our
lease portfolio is substantially comprised of operating leases related to leases of real estate and improvements. From time to time,
we may also lease various types of small equipment and vehicles.
Operating
lease right-of-use (“ROU”) assets represent our right to use an individual asset for the lease term and lease liabilities
represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at
the commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide the lessor’s
implicit rate we use the incremental borrowing rate IBR, in determining the present value of lease payments by utilizing a fully collateralized
rate for a fully amortizing loan with the same term as the lease.
Lease
terms include options to extend the lease when it is reasonably certain those options will be exercised. For leases with terms greater
than 12 months, we record the related asset and obligation at the present value of lease payments over the term. Our leases can include
rental escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments when
such renewal options and/or termination options are reasonably certain of exercise.
A
ROU asset is subject to the same impairment guidance as assets categorized as plant, property, and equipment. As such, any impairment
loss on ROU assets is presented in the same manner as an impairment loss recognized on other long-lived assets.
A
lease modification is a change to the terms and conditions of a contract that change the scope or consideration of a lease. For example,
a change to the terms and conditions to the contract that adds or terminates the right to use one or more underlying assets, or extends
or shortens the contractual lease term, is a modification. Depending on facts and circumstances, a lease modification may be accounted
as either: (1) the original lease plus the lease of a separate asset(s) or (2) a modified lease. A lease will be remeasured if there
are changes to the lease contract that do not give rise to a separate lease.
Impairment
of long-lived Assets
U.S.
GAAP requires that long-lived assets held by the Company be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset group may not be recoverable. No asset impairments were recorded by the Company for the years ended
November 30, 2022 and 2021.
Revenue
Recognition.
When
entering into contracts with our customers, we follow the five steps outlined in Accounting Standards Codification Topic 606, Revenue
from Contracts with Customers (Topic 606):
|
i. |
Identify
the contract with our customer. |
|
ii. |
Identify
the performance obligations in the contract. |
|
iii. |
Determine
the transaction price. |
|
iv. |
Allocate
the transaction price to the performance obligations. |
|
v. |
Evaluate
the satisfaction of the performance obligations. |
We
account for contracts, with our customers, when we have approval and commitment from both parties, the rights of the parties are identified,
payment terms are established, the contract has commercial substance and collectability of consideration is probable.
Under
Topic 606, we recognize revenue when or as we satisfy a performance obligation by transferring a promised good or service to our customer.
A good or service is considered transferred when the customer obtains control. The standard defines control as an entity’s ability
to direct the use of, and obtain substantially all of the remaining benefits from, an asset. We recognize revenue once control has passed
to the customer. The following indicators are evaluated in determining when control has passed to the customer:
|
i. |
We
have a right to payment for the product or service, |
|
ii. |
The
customer has legal title to the product, |
|
iii. |
We
have transferred physical possession of the product to the customer, |
|
iv. |
The
customer has the risk and rewards of ownership of the product, and |
|
v. |
The
customer has accepted the product. |
The
following are the two revenue streams:
Revenue
Recognition for Sale and/or Install of Power Systems. Revenues from the sale and installation of power systems are recognized
when control has passed to the customer. The customer is considered to have control of the asset when the customer accepts the power
system, or when they otherwise direct its use. Contracts for power systems generally contain only a single performance obligation.
The transaction price of contracts does not contain variable considerations; therefore, the transaction price is designated
completely to the single performance obligation of the contract. We generally manufacture the power systems that we sell to our
customers. Payment for these contracts is generally due in three installments. The first installment, which makes up fifty percent
of the transaction price, is due when the contract commences. The second installment, which makes up twenty-five percent of the
transaction price, is due when construction is fifty percent complete. The final installment is due when the performance obligation
is satisfied. The Company generally ships and installs, where appropriate, the power system equipment to the customer, though some
customers take control of assets before shipping occurs. Management uses the ratio of actual costs of expected costs to determine the estimated percentage of completion and
revenue recognized over time.
Some of our contracts are to enhance assets controlled by the customer. In these cases, revenue is earned as the
performance obligation is satisfied, and costs are expensed as they occur. Payment terms for these contracts generally match the payment
terms for assets not controlled by the customer. On a periodic basis, management evaluates progress towards completion of each contract
based on professional judgment and expertise. This is considered an appropriate method because management is aware of the specifications
requested by the customer and can evaluate the progress toward those specifications.
The
Company has not had experience with returns to date. Additionally, the customer is generally involved in the customization and selection
of specifications for the contracted goods and services. Therefore, management considers returns as they arise.
The
Company provides explicit warranties on products, in that it provides assurance that the related product will function as the parties
intended. These warranties are not separably purchasable. Warranties do not constitute a separate performance obligation.
Revenue
Recognition for the Design and Testing of Power Systems. Contracts for the Design
and Testing of Power Systems are generally considered a single performance obligation. This performance obligation is
generally considered satisfied when we provide the design or the final report of the tests to the customer at a point in time.
Payment for these contracts is generally due when the report is delivered.
Freight
Costs. We record both the freight billed to its customers and the related freight costs as cost of sales
when the underlying product revenue is recognized. For freight not billed to its customers, we record the freight costs as cost
of sales. The Company considers shipping to be a fulfillment activity and not a separate performance obligation.
Costs
to Obtain or Fulfill a Contract. The Company does not currently employee salespeople, therefore sales commissions are not capitalized
nor amortized over the life of the relationship with customers. However, the Company does possess multiple demo trailers, and the costs
of constructing these demo trailers have been capitalized and are amortized over their expected useful life.
Disaggregated
Revenue. Management considers the information that may be garnered by disaggregating revenue in the following manner to be informative:
SCHEDULE
OF DISAGGREGATION OF REVENUE
| |
November 30, | |
| |
2022 | | |
2021 | |
| |
(Restated) | | |
| |
Sales of services | |
$ | 37,673 | | |
$ | 15,000 | |
Sales of products | |
| 2,392,521 | | |
| 355,341 | |
Total sales | |
$ | 2,430,194 | | |
$ | 370,341 | |
Reconciliation
of Contract Balances. During years ended November 30, 2022 and 2021 large contracts with two major customers were signed.
These contracts were not completed during the years, but partial payments were collected in the sum of $2,842,356 and $1,007,709, respectively.
The
following table provides a summary of the changes included in contract liabilities – customer deposits during the years ended November 30, 2022 and 2021:
SUMMARY
OF CHANGES IN DEFERRED REVENUE
| |
November 30, | |
| |
2022 | | |
2021 | |
| |
(Restated) | | |
| |
Beginning balance | |
$ | 1,007,709 | | |
$ | - | |
Additions to contract liabilities | |
| 4,264,841 | | |
| 1,613,050 | |
Deductions to contract liabilities | |
| (2,430,194 | ) | |
| (605,341 | ) |
Ending balance | |
$ | 2,842,356 | | |
$ | 1,007,709 | |
Remaining
Performance Obligations. For contracts existing as of November 30, 2022, we had approximately $5,600,000
in unsatisfied performance
obligations yet to be collected, which are expected to be fully satisfied within 1-2 years.
Cost
of Revenue
The
expenses that are included in costs of revenue include all raw material and in-house manufacturing costs—including manufacturing labor and certain indirect manufacturing costs like rent and utility costs for the
manufacturing facility—for the products we manufacture.
Advertising
The
Company expenses marketing and advertising costs as incurred. During the year ended November 30, 2022 and 2021, the Company spent $71,725
and $167,020, respectively, on marketing, trade show and store front expense and advertising, net of co-operative rebates.
Settlement
During
the year ended November 30, 2022, the Company issued preferred stock and recognized a settlement expense of $983,500 to
one of the founders of the Company as part of a settlement agreement with a third-party. In connection with the legal settlement,
the Company also recognized a gain of $20,450 for a sublease security deposit.
Concentration
of Credit and Business Risk
The
Company maintains its cash accounts at a commercial bank located in United States. The FDIC insures $250,000 per bank for the total of
all depository accounts. As of November 30, 2022 and 2021, the Company had approximately $1,010,000 and $107,189, respectively, in excess
of the FDIC insured amount. The Company performs ongoing evaluation of its financial institutions to limit its concentration of risk
exposure. Management believes this risk is not significant due to the financial strength of the financial institution utilized by the
Company.
For
the year ended November 30, 2022, two vendors accounted for 29% of purchases. For the year ended November 30, 2021, one vendor accounted
for 15% of purchases.
For the years ended November 30, 2022 and
2021, two customers accounted for 98.6% and 97.3%, respectively, of the Company’s revenues.
Two customers represented 100% of the balance
of accounts receivable as of November 30, 2022, and one customer represented 100% of the accounts receivable balance as of November 30,
2021.
Stock-Based
Compensation
The
Company accounts for stock grants that are issued to non-employees based on the estimated fair value of goods or services provided to
the Company.
Income
Taxes
We
account for our income taxes in accordance with Income Taxes Topic of the FASB ASC 740, which requires recognition of deferred tax assets
and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and tax credit carry forwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that
includes the enactment date.
Income
tax expense is based on reported earnings before income taxes. Deferred income taxes reflect the impact of temporary differences between
assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes and are measured by applying
enacted tax rates in effect in years in which the differences are expected to reverse.
We
also follow the guidance related to accounting for income tax uncertainties. In accounting for uncertainty in income taxes, the Company
recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely
than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized
in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement
with the relevant tax authority.
Our
income is subject to taxation in the United States. Significant judgment is required in evaluating the Company’s tax positions
and determining its provision for income taxes. The Company establishes reserves for income tax-related uncertainties based on estimates
of whether, and the extent to which, additional taxes will be due. These reserves for tax contingencies are established when we believe
positions do not meet the more-likely-than-not recognition threshold. We adjust uncertain tax liabilities in light of changing facts
and circumstances, such as the outcome of a tax audit or lapse of a statute of limitations. The provision for income taxes includes the
impact of uncertain tax liabilities and changes in liabilities that are considered appropriate.
Currently,
2019, 2020, and 2021 tax years are open and subject to examination by the taxing authorities. However, the Company is not currently under
audit nor has the Company been contacted by any of the taxing authorities.
Fair
Value Measurements
The
Company follows the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (“ASC”) Topic
820, Fair Value Measurements and Disclosures, which clarifies the definition of fair value, prescribes methods for measuring fair value,
and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1 |
Observable inputs such
as unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. |
|
|
Level 2 |
Inputs, other than quoted
prices in Level 1, that are observable for the asset or liability in active markets, quoted prices for identical or similar assets
and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated
by observable market data. |
|
|
Level 3 |
Unobservable inputs that
reflect management’s assumptions based on the best available information. |
The
Company did not identify any assets and liabilities that are required to be presented in the balance sheets at fair value in accordance
with the relevant accounting standards. The carrying amount of the Company’s cash, accounts receivable, inventory, prepaid expenses,
accounts payable, accrued liabilities and other current liabilities approximate their fair value because of the short-term nature of
these instruments.
Recent
Accounting Standards
In
February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02
– Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities
on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective December 1, 2022, for the Company,
with early implementation allowed. The Company elected to adopt ASU 2016-02 effective December 1, 2020. The adoption of ASU 2016-02 required
the Company to record lease assets and liabilities on the balance sheet and also disclose key information about the Company’s leasing
arrangement.
In
August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06,
Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s
Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates
the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies
the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard
also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s
own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for
all convertible instruments. ASU 2020-06 is effective January 1, 2022, and should be applied on a full or modified retrospective basis,
with early adoption permitted beginning on January 1, 2021. The Company adopted ASU 2020-06 effective December 31, 2021, applied on the
full retrospective basis. The adoption of ASU 2020-06 did not have an impact on the Company’s financial statements.
The
Company has reviewed all other recently issues, but not yet adopted, accounting standards in order to determine effects, if any
on its results of operations, financial position or cash flows. Based on that review, the Company believes that none of these pronouncements
will have a significant effect on its financial statements.
NOTE
4 – GOING CONCERN
The
accompanying financial statements have been prepared assuming that we will continue as a going concern. As of November 30, 2022, we
had an accumulated deficit of $3,532,141, and
we had a net loss of $2,353,113 for
the year then ended. These facts and others raise substantial doubt about the Company’s ability to continue as a going concern
for a period of twelve months from the date of this filing. The Company’s continuation as a going concern is dependent upon
its ability to generate sufficient cash flow to meet its obligations on a timely basis. The financial statements do not include any
adjustments that might be necessary if the Company is unable to continue as a going concern.
Management’s
plan to eliminate the going concern situation includes, but is not limited to, the following:
|
● |
The
creation of additional sales and profits across its product lines; |
|
|
|
|
● |
The
continuation of improving cash flow by maintaining moderate cost reductions; |
|
|
|
|
● |
Requiring
50% deposit on all purchase orders; |
|
|
|
|
● |
Continuing
positive cash flows from operating activities; |
|
|
|
|
● |
Potential
issuances of additional common stock to existing shareholders and through PIPE financing. |
NOTE
5 – ACCOUNTS RECEIVABLE
Accounts
receivable consisted of the following as of November 30:
SCHEDULE
OF ACCOUNTS RECEIVABLES
| |
2022 | | |
2021 | |
Trade Accounts Receivable | |
$ | 81,667 | | |
$ | 15,000 | |
Less Allowance for doubtful accounts | |
| (7,500 | ) | |
| - | |
Total Accounts Receivable (net) | |
$ | 74,167 | | |
$ | 15,000 | |
Accounts
receivable as of November 30, 2022 and 2021 are made up of trade receivables due from customers in the ordinary course of business.
NOTE
6 – INVENTORY
Inventory
consisted of the following as of November 30:
SCHEDULE
OF INVENTORY
| |
2022 | | |
2021 | |
Raw materials | |
$ | 347,207 | | |
$ | 315,462 | |
Work in process | |
| - | | |
| 102,989 | |
Total Inventory | |
| 347,207 | | |
| 418,451 | |
NOTE
7 – PREPAID EXPENSES
Prepaid
expenses consisted of the following as of November 30:
SCHEDULE OF PREPAID EXPENSES
| |
2022 | | |
2021 | |
Prepaid expenses | |
$ | 573,494 | | |
$ | 14,024 | |
Prepaid insurance | |
| 10,638 | | |
| 4,919 | |
Total prepaid expenses | |
$ | 584,132 | | |
$ | 18,943 | |
NOTE
8 – PROPERTY AND EQUIPMENT
Property
and equipment consist of the following as of November 30:
SCHEDULE
OF PROPERTY AND EQUIPMENT
| |
2022 | | |
2021 | |
Machinery and equipment | |
$ | 579,076 | | |
$ | 451,592 | |
Leasehold improvements | |
| 141,580 | | |
| 141,580 | |
Demonstration units | |
| 1,685,506 | | |
| 1,685,506 | |
Construction in progress | |
| 689,711 | | |
| - | |
Total property and equipment | |
| 3,095,873 | | |
| 2,278,678 | |
Less: accumulated depreciation | |
| (532,107 | ) | |
| (85,113 | ) |
Property and equipment, net | |
$ | 2,563,766 | | |
$ | 2,193,565 | |
Depreciation
expense for the years ended November 31, 2022 and 2021 was $446,994
and $85,114,
respectively.
NOTE
9 - ACCOUNTS PAYABLE
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts
payable of $627,976 and $468,487 are made up of payables due to vendors in the ordinary course of business as of November 30, 2022
and 2021, respectively. For the year ended November 30, 2022, two vendors accounted for 29%
of purchases. For the year ended November 30, 2021, one vendor accounted for 15%
of purchases.
NOTE
10 – STOCKHOLDERS’ EQUITY
STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred
Stock
Series
A
As
of November 30, 2022 and 2021, there were 100,000 Preferred shares authorized, and 19,148 and 10,355 shares were outstanding, for each
year respectively. Each Series A Preferred share is entitled to one vote on matters that only the Holders are entitled to vote upon.
The
Preferred stock is entitled to receive non-cumulative preferential dividends, when and as declared by the Board of Directors.
Dividends accrue at 8%
per annum beginning on the original issue date, calculated as simple interest. For the years ended November 30, 2022 and 2021, no declarations
have been made.
The
Preferred stock has a conversion price of eighty percent (80%) of the lowest price per share at which the Corporation’s securities
are issued in a Change of Control Transaction or a Qualified Financing. In the event of a Change of Control Transaction that is a reverse
merger or IPO, each share of preferred stock shall automatically convert into shares of the Company’s common stock and the price
per share shall be equal to the amount payable on a share of Common stock in the Change of Control Transaction or IPO. If no such amount
is payable, the fair market value of Common stock, as determined by the Board of Directors.
During
the year ended November 30, 2021, the Company issued 9,043 shares of preferred stock to several investors for cash of $2,260,671 and
1,312 shares of preferred stock for contributed assets.
During
the year ended November 30, 2022, the Company issued 4,860
shares of preferred stock to several investors
for cash of $1,214,995
and 3,933
preferred shares to one of the
founders as part of a settlement agreement.
Common
Stock
As
of November 30, 2022 and 2021, there were 1,000,000 Common shares authorized and 500,000 shares issued and outstanding, respectively.
Upon
formation of the Company, the common shares authorized was 10,000.
In May 2021, 2,000
common shares were issued to Robert Mount and
Lynn Barney, the Company’s founders. On May 13, 2021, the articles of incorporation were amended to increase the authorized
common shares to 1,000,000,
in addition to authorizing the preferred stock discussed above. Upon the filing of the amended articles of incorporation, the common
shares were subject to a 250-for-1 forward stock split; thus, increasing the common shares
outstanding to 500,000 shares.
NOTE
11 – INCOME TAX
For
the years ended November 30, 2022 and 2021, the Company had $100 and $1,254, respectively, of current income tax provision and no deferred
income tax provision.
The
tax effect of temporary differences that give rise to deferred tax assets and deferred tax liabilities are as follows as of November
30,
SCHEDULE
OF DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES
Deferred tax assets | |
2022 | | |
2021 | |
Net operating losses | |
$ | 1,259,148 | | |
$ | 396,202 | |
Right of use asset/liability | |
| 27,728 | | |
| 18,114 | |
Allowance and reserves | |
| 1,862 | | |
| - | |
Total gross deferred tax assets | |
| 1,288,738 | | |
| 414,316 | |
Less: valuation allowance | |
| (868,535 | ) | |
| (292,160 | ) |
Total deferred tax assets | |
| 420,203 | | |
| 122,156 | |
| |
| | | |
| | |
Deferred tax liabilities | |
| | | |
| | |
Depreciation of fixed assets | |
| (420,203 | ) | |
| (122,156 | ) |
Total deferred tax liabilities | |
| (420,203 | ) | |
| (122,156 | ) |
| |
| | | |
| | |
Net deferred tax assets | |
$ | - | | |
$ | - | |
Components
of net deferred tax assets, including a valuation allowance, are as follows as of November 30:
SCHEDULE
OF COMPONENTS OF NET DEFERRED TAX ASSETS
| |
2022 | | |
2021 | |
Deferred tax assets | |
$ | 1,288,738 | | |
$ | 414,316 | |
Valuation allowance | |
| (868,535 | ) | |
| (292,160 | ) |
Total deferred tax assets | |
| 420,203 | | |
$ | 122,156 | |
Deferred tax liabilities | |
| (420,203 | ) | |
| (122,156 | ) |
Total net deferred assets/liabilities | |
$ | - | | |
$ | - | |
The
valuation allowance for deferred tax assets as of November 30, 2022 and 2021 was $868,535
and $292,160,
respectively. In assessing the recovery of the deferred
tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those
temporary differences become deductible. Management considers the scheduled reversals of future deferred tax liabilities, projected future
taxable income, and tax planning strategies in making this assessment. Management has recorded a 100%
valuation allowance, against its net deferred tax assets, since management believes it is more likely than not that it will not be realized
at the date of this statement. The Company will continue to monitor the potential utilization of this asset. Should factors and evidence
change to aid in this assessment, a potential adjustment to the valuation allowance in future periods may occur. The Company records
any penalties and interest as a component of operating expenses.
The
reconciliation between statutory rate and effective rate is as follows as of November 30,
SCHEDULE OF RECONCILIATION BETWEEN STATUTORY RATE AND EFFECTIVE RATE
| |
2022 | | |
2021 | |
Federal statutory tax rate | |
| 21 | % | |
| 21 | % |
State taxes | |
| 0 | % | |
| 0 | % |
Nondeductible items | |
| 0 | % | |
| 0 | % |
Change in valuation allowance | |
| (21 | )% | |
| (21 | )% |
Return to provision adjustments | |
| 0 | % | |
| 0 | % |
| |
| | | |
| | |
Effective tax rate | |
| 0 | % | |
| 0 | % |
The
Company reported no uncertain tax liability as of November 30, 2022 and expects no significant change to the uncertain tax liability
over the next twelve months. The Company’s 2019, 2020, and 2021 federal and state income tax returns are open for examination by
the applicable governmental authorities.
As
of November 30, 2022, the Company has a net operating loss (NOL) carryforward of $5,097,041. The NOL carryforward does not have
an expiration. Under Section 382 of the Internal Revenue Code of 1986, as amended (“IRC Section 382”), a corporation that
undergoes an “ownership change” is subject to limitations on its use of pre-change NOL carryforwards to offset future taxable
income. Within the meaning of IRC
Section 382, an “ownership change” occurs when the aggregate stock ownership of certain stockholders (generally 5% shareholders,
applying certain look-through rules and aggregation rules which combine unrelated shareholders that do not individually own 5% or more
of the corporation’s stock into one or more “public groups” that may be treated as 5-percent shareholder) increases
by more than 50 percentage points over such stockholders’ lowest percentage ownership during the testing period (generally three
years). In general, the annual use limitation
equals the aggregate value of common stock at the time of the ownership change multiplied by a specified tax-exempt interest rate. The
Company has not completed a study as to whether there is a 382 limitation on its NOLs that will limit or possibly eliminate the use of
its NOLs in the future. Company’s Management has recorded a 100%
valuation allowance on the entire NOL as it believes that it is more likely than not that the deferred tax asset associated with the
NOLs will not be realized regardless of whether or not an “ownership change” has occurred.
NOTE
12 – COMMITMENTS AND CONTINGENCIES
Operating
Leases
For
the year ended November 30, 2021, we had two Operating leases as follows:
|
● |
Office
space in Lindon, Utah, with monthly payments of $5,000 for approximately 2,790 square feet of rentable space, and a discount rate
of 3.28%. As of November 30, 2021, we had 17 months remaining on this lease. |
|
● |
Manufacturing
space in American Fork, Utah, with a monthly payment of $40,826.52 for approximately 80,052 square feet of rentable space, and a
discount rate of 3.28%. As of November 30, 2021, we had 80 months remaining on the lease. |
We
entered into two lease agreements each beginning June 1, 2021. The first lease agreement was for office space in Lindon, Utah, and was
for a term of 24 months. The second lease agreement was for manufacturing space in American Fork, Utah, and was for a term of 86 months.
The first two months of the American Fork lease agreement were rent free.
Both
lease agreements contain a variable portion that covers Common Area Maintenance fees. These fees represent our proportionate share of
the leased square footage relative to the total square footage of the lessor’s property. No other aspect of the lease agreements
contains variable fees.
Both
leases contain options for extending the leases at the end of the initially stated lease periods. The Lindon lease can be renewed for
one-year terms at a three percent increase in monthly rent. When we signed this lease, we expected to renew the lease for one complete
year, and thus treated the lease as a two-year lease. The American Fork lease also contains options to renew the lease, but since the
lease was initially for such a long period, we could not determine that it was reasonably certain that we would renew the lease, so we
treated this lease as an 86-month lease.
As
these leases do not provide the implicit rate, we use an estimated incremental borrowing rate (IBR). To estimate the IBR, we used the
risk-free rate of the US treasury rate, plus a premium for credit risk.
As
of November 30, 2022, we had two Operating leases as follows:
|
● |
Office
space in Lindon, Utah, with monthly payments of $7,557 for approximately 15,503 square feet of rentable space, and a discount
rate of 7.52%. As of November 30, 2022, we had 71 months remaining on the lease. |
|
● |
Manufacturing
space in American Fork, Utah, with a monthly payment of $41,643.05 for approximately 80,052 square feet of rentable space, and a
discount rate of 3.28%. As of November 30, 2022, we had 68 months remaining on the lease. |
During
the year ended November 30, 2022 we cancelled our lease for office space in Lindon Utah early, with no material gain or loss, and entered
into a new lease agreement with the same lessor for different, larger office space, and for longer terms. Specifically, the new Lindon
lease is for 72 months, and more square footage. This lease also contains options for extending the terms of the lease, but as we could
not determine whether it was reasonably certain that we would extend the lease, we treated this lease as a 72-month lease.
Other
information related to our operating leases is as follows:
SCHEDULE
OF OTHER INFORMATION RELATED TO OPERATING LEASES
ROU asset – December 1, 2020 | |
$ | - | |
Additions | |
| 3,359,674 | |
| |
| - | |
Amortization | |
| (236,109 | ) |
ROU asset - November 30, 2021 | |
$ | 3,123,565 | |
| |
| | |
Lease liability – December 1, 2020 | |
| - | |
Additions | |
$ | 3,359,674 | |
| |
| - | |
Amortization | |
| (163,161 | ) |
Lease liability - November 30, 2021 | |
$ | 3,196,513 | |
ROU asset – December 1, 2021 | |
$ | 3,123,565 | |
Additions | |
| 1,633,349 | |
Deletions | |
| (30,156 | ) |
Amortization | |
| (487,082 | ) |
ROU asset - November 30, 2022 | |
$ | 4,239,676 | |
| |
| | |
Lease liability - December 1, 2021 | |
$ | 3,196,513 | |
Additions | |
| 1,633,349 | |
Deletions | |
| (30,606 | ) |
Amortization | |
| (447,916 | ) |
Lease liability - November 30, 2022 | |
$ | 4,351,340 | |
As
of November 30, 2022, our operating leases had a weighted average remaining lease term of 68.85 months and a weighted average discount
rate of 5.9%. As of November 30, 2021, our operating leases had a weighted average lease term of 78.33 months and weighted average discount
rate of 3.28%.
The
table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining years
to the lease liabilities recorded on the Balance Sheet as of November 30, 2022:
SCHEDULE
OF MINIMUM LEASE PAYMENTS
Fiscal Year | |
Minimum
lease payments | |
2023 | |
$ | 681,173 | |
2024 | |
| 879,958 | |
2025 | |
| 900,306 | |
2026 | |
| 921,161 | |
2027 | |
| 942,536 | |
Thereafter | |
| 741,909 | |
Total | |
| 5,067,043 | |
Less interest | |
| (715,704 | ) |
Present value of future minimum lease payments | |
| 4,351,340 | |
Less current obligations | |
| (475,195 | ) |
Long term lease obligations | |
$ | 3,876,145 | |
Subleases
We
entered into sublease agreements for the manufacturing property in American Fork for fiscal years 2022 and 2021. We subleased 10,000
square feet in 2022 for a total of $84,900 in sublease income, and 30,000
square feet in 2021 for a total of $207,538
in sublease income. In connection with the sublease,
there were lease deposits of $0 and $34,000
for the years ended November 30, 2022 and 2021
respectively.
NOTE
13 – SUBSEQUENT EVENTS
On December 1, 2022, pursuant to an Agreement
and Plan of Merger, dated as of December 1, 2022, by and among Nestbuilder (“Parent”), NB Merger Corp. (the “Merger
Sub”) a Delaware corporation and a direct, wholly owned subsidiary of Nestbuilder, Renewable Innovations, Inc. (the “Company”),
a Delaware corporation, Lynn Barney, as the representative of the Company’s securityholders, and Alex Aliksanyan, as the Parent
representative, the Parent acquired the Company through the merger of the merger sub with and into the Company (the “Merger”),
with the Company continuing as the surviving corporation and becoming a wholly owned subsidiary of the Parent.
In connection with the Merger, the Parent filed articles of merger with the Nevada Secretary of State to change its
name to Renewable Innovations, Inc. pursuant to a parent/subsidiary merger between Parent and the Company as a wholly owned non-operating
subsidiary, which was established for the purpose of giving effect to this name change.
Immediately
prior to the Merger, there were 6,090,580
shares of Parent Common Stock issued and outstanding
and warrants outstanding to acquire up to an aggregate of 10,135,000
shares of Parent Common Stock. As a result of
the Merger, Parent issued to the shareholders of the Company an aggregate of 2,155,684
shares of Parent Series A Convertible Preferred
Stock, par value $0.0001
per share, each share of which is convertible
into 100
shares of Parent Common Stock and votes on
an as converted basis, which represents a 97%
ownership interest based on Parent’s
fully diluted capitalization immediately following the Merger. As a result of the foregoing transactions, Parent underwent a change of
control on December 1, 2022, which will be accounted for as a reverse merger and recapitalization of the Company.
In
accordance with ASC 855, “Subsequent Events”, the Company has evaluated all subsequent events through the date of this filing.
No other significant events have occurred besides the events disclosed in the Notes to the Financial Statements.
Unaudited
Pro Forma Condensed Combined Financial Statements
On
December 1, 2022, pursuant to an Agreement and Plan of Merger, dated as of December 1, 2022, by and among Nestbuilder.com Corp (“Nestbuilder”),
NB Merger Corp., a Delaware corporation and a direct, wholly owned subsidiary of Nestbuilder (“the Parent”), Renewable Innovations,
Inc., a Delaware corporation (“the Company”), Lynn Barney, as the representative of the Company’s securityholders,
and Alex Aliksanyan, as the Parent representative, legally the Parent acquired the Company through the merger of the Parent with and
into the Company (the “Merger”), for accounting purposes the Company continued as the surviving corporation.
In
connection with the Merger, the Parent filed articles of merger with the Nevada Secretary of State to change its name to Renewable Innovations,
Inc. pursuant to a parent/subsidiary merger between Nestbuilder (as “Nestbuilder.com Corp.”) and the Company as a wholly
owned non-operating subsidiary, which was established for the purpose of giving effect to this name change.
Immediately
prior to the Merger, there were 6,090,580 shares of Parent Common Stock issued and outstanding and warrants outstanding to acquire up
to an aggregate of 10,135,000 shares of Parent Common Stock. As a result of the Merger, Parent issued to the shareholders of the Company
an aggregate of 2,155,684 shares of Parent Series A Convertible Preferred Stock, par value $0.0001 per share, each share of which is
convertible into 100 shares of Parent Common Stock, which represents a 93% ownership interest based on Parent’s fully-diluted capitalization
immediately following the Merger. As a result of the foregoing transactions, Parent underwent a change of control on December 1, 2022,
which will be accounted for as a reverse merger.
For
financial accounting purposes, the acquisition of the Parent by the Company (referred to as the “Merger”) was valued under
the purchase price method. Accordingly, financial statements presented following the Merger will be viewed as being fairly valued as
of December 1, 2022, and represent the operations of the Company prior to the Merger.
Prior
to the Merger, companies involved had fiscal year ends of November 30. The accompanying unaudited pro forma condensed combined financial
statements were prepared based on a November 30 year end. The unaudited pro forma condensed combined balance sheet at November 30, 2022
combines the historical consolidated balance sheets of the Company and the Parent, giving effect to the Merger as if it had been consummated
on November 30, 2022. The unaudited pro forma condensed combined statement of operations for the year ended November 30, 2022 combines
the historical consolidated statements of income of the Company and the Parent, giving effect to the Merger as if it had occurred on
December 1, 2021. The audited pro forma combined financial data should be read in connection with the notes to these unaudited pro forma
condensed combined financial statements and the following:
| ● | Renewable
Innovations’ separate historical audited consolidated financial statements and the
related notes for the years ended November 30, 2022 and 2021; and |
| | |
| ● | Nestbuilder’s
separate historical audited consolidated financial statements and the related notes for the
years ended November 30, 2022 and 2021. |
The
unaudited pro forma condensed combined financial statements have been prepared for informational purposes only. The historical financial
information has been adjusted to give effect to pro forma events that are: (1) directly attributable to the Merger and (2) factually
supportable and reasonable under the circumstances.
The
unaudited pro forma adjustments represent management’s estimates based on information available at this time, including the restated
figures for Renewable Innovation. The unaudited pro forma combined financial statements are not necessarily indicative of what the financial
position or results of operations actually would have been had the acquisition been completed at the dates indicated. In addition, the
unaudited pro forma combined financial statements do not purport to project the future financial position or operating results of the
consolidated company. The unaudited pro forma combined financial statements do not give consideration to the impact of possible revenue
enhancements, expense efficiencies, future underwriting decisions or changes in the book of business that may result from the acquisition.
Renewable Innovations, Inc.
Pro Forma Condensed
Combined Balance Sheets
(Unaudited)
November 30, 2022
| |
Historical | | |
Proforma | |
| |
Nestbuilder | | |
Renewable Innovations | | |
Adjustments | | |
Combined | |
| |
| | |
(Restated) | | |
| | |
(Restated) | |
Assets | |
| | | |
| | | |
| | | |
| | |
Current Assets | |
| | | |
| | | |
| | | |
| | |
Cash | |
$ | 2,571 | | |
$ | 1,260,199 | | |
$ | - | | |
$ | 1,262,770 | |
Accounts receivable | |
| - | | |
| 74,167 | | |
| - | | |
| 74,167 | |
Inventories | |
| - | | |
| 347,207 | | |
| - | | |
| 347,207 | |
Prepaid expenses and deposits | |
| - | | |
| 584,132 | | |
| - | | |
| 584,132 | |
Contract asset | |
| - | | |
| 43,528 | | |
| | | |
| 43,528 | |
Total current assets | |
| 2,571 | | |
| 2,309,233 | | |
| - | | |
| 2,311,804 | |
| |
| | | |
| | | |
| | | |
| | |
Property and equipment, net | |
| - | | |
| 2,563,766 | | |
| - | | |
| 2,563,766 | |
Deposits | |
| - | | |
| 35,000 | | |
| - | | |
| 35,000 | |
Right of use asset | |
| - | | |
| 4,239,676 | | |
| - | | |
| 4,239,676 | |
Total assets | |
$ | 2,571 | | |
$ | 9,147,675 | | |
$ | - | | |
$ | 9,150,246 | |
| |
| | | |
| | | |
| | | |
| | |
Liabilities and Stockholders’ Equity (Deficit) | |
| | | |
| | | |
| | | |
| | |
Current Liabilities | |
| | | |
| | | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 111,499 | | |
$ | 627,976 | | |
$ | - | | |
$ | 739,475 | |
Accrued payroll liabilities | |
| - | | |
| 70,973 | | |
| - | | |
| 70,973 | |
Contract liabilities - customer deposits | |
| - | | |
| 2,842,356 | | |
| - | | |
| 2,842,356 | |
Lease liability - current portion | |
| - | | |
| 475,195 | | |
| - | | |
| 475,195 | |
Total current liabilities | |
| 111,499 | | |
| 4,016,500 | | |
| - | | |
| 4,127,999 | |
| |
| | | |
| | | |
| | | |
| | |
Lease liability, net of current portion | |
| - | | |
| 3,876,145 | | |
| - | | |
| 3,876,145 | |
Total liabilities | |
| 111,499 | | |
| 7,892,645 | | |
| - | | |
| 8,004,144 | |
| |
| | | |
| | | |
| | | |
| | |
Stockholders’ Equity (Deficit) | |
| | | |
| | | |
| | | |
| | |
Convertible series A preferred stock, $0.0001 par value | |
| - | | |
| 19 | | |
| 197 | | |
| 216 | |
Common stock, $0.0001 par value; | |
| 609 | | |
| 500 | | |
| (500 | ) | |
| 609 | |
Additional paid-in-capital | |
| 1,544,256 | | |
| 4,786,652 | | |
| (1,533,490 | ) | |
| 4,797,418 | |
Treasury stock, at cost (640,000 shares) | |
| (120,000 | ) | |
| - | | |
| - | | |
| (120,000 | ) |
Accumulated (deficit) | |
| (1,533,793 | ) | |
| (3,532,141 | ) | |
| 1,533,793 | | |
| (3,532,141 | ) |
Total stockholders’ (deficit) | |
| (108,928 | ) | |
| 1,255,030 | | |
| - | | |
| 1,146,102 | |
| |
| | | |
| | | |
| | | |
| | |
Total liabilities and stockholders’ equity | |
$ | 2,571 | | |
$ | 9,147,675 | | |
$ | - | | |
$ | 9,150,246 | |
The accompanying notes are integral to these unaudited consolidated financial statements.
Renewable Innovations, Inc.
Pro Forma Condensed
Combined Statement of Operations
(Unaudited)
November 30, 2022
| |
Historical | | |
| |
| |
Nestbuilder | | |
Renewable Innovations | | |
Proforma Combined | |
| |
| | |
(Restated) | | |
(Restated) | |
Revenues | |
| | | |
| | | |
| | |
Sales | |
$ | 46,675 | | |
$ | 2,430,194 | | |
$ | 2,476,869 | |
| |
| | | |
| | | |
| | |
Cost of revenues | |
| 17,195 | | |
| 2,557,814 | | |
| 2,575,009 | |
| |
| | | |
| | | |
| | |
Gross profit (loss) | |
| 29,480 | | |
| (127,620 | ) | |
| (98,140 | ) |
| |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | |
General and administrative | |
| 882,832 | | |
| 989,916 | | |
| 1,872,748 | |
Depreciation and amortization | |
| - | | |
| 357,327 | | |
| 357,327 | |
Total operating expenses | |
| 882,832 | | |
| 1,347,243 | | |
| 2,230,075 | |
| |
| | | |
| | | |
| | |
Operating (loss) | |
| (853,352 | ) | |
| (1,474,863 | ) | |
| (2,328,215 | ) |
| |
| | | |
| | | |
| | |
Other income (expense) | |
| | | |
| | | |
| | |
Interest expense | |
| (7,258 | ) | |
| - | | |
| (7,258 | ) |
Gain on forgiveness of paycheck protection program loan from SBA | |
| 15,077 | | |
| - | | |
| 15,077 | |
Rental income | |
| - | | |
| 84,900 | | |
| 84,900 | |
Settlement expense | |
| - | | |
| (983,500 | ) | |
| (983,500 | ) |
Gain on sale of assets | |
| - | | |
| 20,450 | | |
| 20,450 | |
Loss on extinguishment of debt | |
| (72,198 | ) | |
| - | | |
| (72,198 | ) |
Total other income (expense) | |
| (64,379 | ) | |
| (878,150 | ) | |
| (942,529 | ) |
| |
| | | |
| | | |
| | |
Income (loss) before income taxes | |
| (917,731 | ) | |
| (2,353,013 | ) | |
| (3,270,744 | ) |
| |
| | | |
| | | |
| | |
Provision for income taxes | |
| - | | |
| 100 | | |
| 100 | |
| |
| | | |
| | | |
| | |
Net (loss) | |
$ | (917,731 | ) | |
$ | (2,353,113 | ) | |
$ | (3,270,844 | ) |
| |
| | | |
| | | |
| | |
Weighted average number of shares outstanding - basic and diluted | |
| 4,088,424 | | |
| | | |
| | |
Basic and diliuted net (loss) per common share | |
$ | (0.22 | ) | |
| | | |
| | |
The accompanying notes are integral to these unaudited consolidated financial statements.
NOTES
TO UNAUDITED PRO FORMA
CONDENSED
COMBINED FINANCIAL STATEMENTS
Note
1 – Basis of Presentation
The
acquisition of the Parent by the Company is being accounted for as a business combination under Financial Accounting Standards Board
Accounting Standards Codification (ASC) 805. Accordingly, the net assets of the Parent are recorded at fair value, and as of November
30, 2022, the fair value of these net assets is the carrying value. The total preferred stock of the surviving corporation is the preferred
stock issued in the Merger, as described above. As the Parent is the legal acquiree, the total common stock of the surviving corporation
is the total common stock of the Parent at the time of the Merger. As the Company is the surviving corporation for accounting purposes,
the accumulated deficit of the surviving corporation is the accumulated deficit of the Company at the time of the Merger. The net balance
of (1) the preferred stock from the Merger measured at par value, (2) the common stock of the Parent measured at par value, and (3) the
accumulated deficit of the Company was applied to Additional paid-in-capital of the surviving corporation.