Item 1. Consolidated
Financial Statements
COMMUNITY REDEVELOPMENT INC.
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of March 31, 2022
INDEX
Community Redevelopment Inc.
Balance Sheet
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Community Redevelopment Inc.
Statement of Operations
(Unaudited)
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Community Redevelopment Inc
Statement of Stockholders' Equity (Deficit)
Unaudited
The accompanying notes are an integral part of
these condensed consolidated financial statements.
Community Redevelopment Inc.
Statement of Cash Flows
(Unaudited)
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Community Redevelopment Inc.
Notes to Consolidated Financial Statements
Unaudited
Note 1–
Organization
Community Redevelopment, Inc. was formed on August
16, 2010 as Crosswind Renewable Energy Corp. an Oklahoma corporation and was formally renamed on June 24th, 2020. We are an
emerging growth company. We were established to build upon community assets through real estate, financial services and technology. Our
experienced team has dedicated their careers to constructing high-quality mixed-use, multifamily residential, and commercial properties
in top metropolitan regions as well as have deep roots in technology and finance industries. Our vision is to integrate our real estate
development proprietary business model across multiple verticals in finance, technology, and real estate. This will provide long-term
value to investors while staying true to our mission of enhancing communities.
Emerging Growth Company
The Company is an “emerging growth company”,
as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and may take advantage of certain exemptions from
various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including,
but not limited to, not being required to comply with the auditor attestation requirements of section 404(b) of the Sarbanes-Oxley Act,
and exemptions from the requirements of Sections 14A(a) and (b) of the Securities Exchange Act of 1934 to hold a nonbinding advisory vote
of stockholders on executive compensation and any golden parachute payments not previously approved.
The Company has elected to use the extended transition
period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows us to delay
the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards
apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with
public company effective dates.
We will remain an “emerging growth company”
for up to five years, although we will lose that status sooner if our revenues exceed $1.07 billion, if we issue more than $1 billion
in non-convertible debt in a three-year period, or if the market value of our common stock that is held by non-affiliates exceeds $700
million as of the end of the second quarter of any fiscal year following the anniversary of the initial reporting.
To the extent that we continue to qualify as
a “smaller reporting company”, as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, after we
cease to qualify as an emerging growth company, certain of the exemptions available to us as an emerging growth company may continue
to be available to us as a smaller reporting company, including: (1) not being required to comply with the auditor attestation requirements
of Section 404(b) of the Sarbanes Oxley Act; (2) scaled executive compensation disclosures; and (3) the requirement to provide only two
years of audited financial statements, instead of three years.
These consolidated financial statements have been
prepared in accordance with generally accepted accounting principles in the United States (GAAP) and include all adjustments necessary
for the fair presentation of the Company’s financial position for the periods presented.
In preparing the consolidated financial statements
in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities as of the dates of the consolidated financial statements, as well as the reported amounts
of revenues and expenses during the reporting period. Significant estimates and assumptions made by management include, but are not limited
to, revenue recognition, the allowance for bad debt, useful life of fixed assets, income taxes and unrecognized tax benefits, valuation
allowance for deferred tax assets, and assumptions used in assessing impairment of long-lived assets. Actual results could differ from
those estimates.
The COVID-19 pandemic has caused uncertainty and
disruption in the global economy and financial markets. As a result, management’s estimates and assumptions may be subject to a
higher degree of variability and volatility that may result in material differences from the current period.
Cash equivalents consist of highly liquid investments with maturities
of three months or less when purchased. Cash and cash equivalents are on deposit with financial institutions without any restrictions.
Cash is a financial instrument
that potentially subjects the Company to concentrations of credit risk. For all periods presented, substantially all of the Company’s
cash was deposited in an account at a single financial institution that management believes is creditworthy. The Company is exposed to
credit risk in the event of default by these financial institutions for amounts in excess of the Federal Deposit Insurance Corporation
insured limits. The Company maintains its cash at a high-quality financial institution and has not incurred any losses to date.
We have no
off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to investors.
The carrying value of cash, accounts receivable, other receivable,
note receivable, other current assets, accounts payable, and accrued expenses, if applicable, approximate their fair values based on the
short-term maturity of these instruments. The carrying amounts of debt were also estimated to approximate fair value.
The Company utilizes the methods of fair value
(“FV”) measurement as described in ASC 820 to value its financial assets and liabilities. As defined in ASC 820, FV is based
on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. In order to increase consistency and comparability in FV measurements, ASC 820 establishes a FV hierarchy that
prioritizes observable and unobservable inputs used to measure FV into three broad levels, which are described below:
Level
1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets
and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the
New York Stock Exchange.
Level 2 –
Pricing inputs are other than quoted prices in active markets but are either directly or indirectly observable as of the reported date.
The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts or priced with
models using highly observable inputs.
Level
3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in
Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts
used to determine the fair value of financial transmission rights.
Our financial instruments consist of our accounts
payable, accrued expenses - related party and loan payable – related party. The carrying amount of our prepaid accounts payable,
accrued expenses- related parties and loan payable – related party approximates their fair values because of the short-term maturities
of these instruments.
A non-controlling, unconsolidated ownership interest in an entity may
be accounted for using one of: (i) equity method where applicable; (ii) fair value option if elected; (iii) fair value through earnings
if fair value is readily determinable, including election of net asset value (“NAV”) practical expedient where applicable;
or (iv) for equity investments without readily determinable fair values, the measurement alternative to measuring at cost adjusted for
any impairment and observable price changes, as applicable.
Changes in fair value of equity method investments
are recorded in realized and unrealized gains (losses) in the condensed combined and consolidated statements of operations.
The
Company identified the conversion feature of convertible notes payable as derivatives.
We
estimate the fair value of the derivatives using multinomial lattice models that value the derivative liabilities based on a probability-weighted
cash flow model using projections of the various potential outcomes. These estimates are based on multiple inputs, including the market
price of our stock, interest rates, our stock price volatility and management’s estimates of various potential equity financing
transactions. These inputs are subject to significant changes from period to period and to management's judgment; therefore, the estimated
fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.
Under
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value
Measurements and Disclosures, and ASC 825, Financial Instruments, the FASB establishes a framework for measuring fair
value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms
that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company's
consolidated financial statements as reflected herein. The carrying amounts of cash, prepaid expense and other current assets,
accounts payable, accrued expenses and notes payable reported on the accompanying consolidated balance sheets are estimated by
management to approximate fair value primarily due to the short-term nature of the instruments.
An
entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value using
a hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s
categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The hierarchy prioritized the inputs into three levels that may be used to measure fair value:
Level
1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level
2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability
such as quoted prices for similar assets or liabilities in markets that are not active.
Level
3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement
of the fair value of the assets or liabilities.
Our derivative
liabilities are measured at fair value on a recurring basis and estimated as follows:
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| March 31, 2022 | |
Total | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
| | |
| | |
| | |
| | |
| |
| Derivative liabilities | |
$ | | |
$ | | |
$ | | |
$ | |
| December 31, 2021 | |
Total | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
| | |
| | |
| | |
| | |
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| Derivative liabilities | |
$ | | |
$ | | |
$ | | |
$ | |
Non-controlling interests represent the share of consolidated entities
owned by third parties. Community Redevelopment recognizes each non-controlling ownership at the estimated fair value of the net assets
at the date of formation or acquisition.
The Company follows subtopic 850-10 of the FASB
ASC for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 related parties
include:
a. affiliates of the Company;
b. entities for which investments
in their equity securities would be required, absent the election of the FV option under the FV Option Subsection of Section 825–10–15,
to be accounted for by the equity method by the investing entity;
c. trusts for the benefit
of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management;
d. principal owners of the
Company;
e. management of the Company;
f. other parties with which
the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent
that one of the transacting parties might be prevented from fully pursuing its own separate interests; and
g. other parties that can
significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the
transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented
from fully pursuing its own separate interests.
The financial statements shall include disclosures
of material-related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary
course of business. However, disclosure of transactions that are eliminated in the preparation of financial statements is not required
in those statements.
The disclosures shall include: a. the nature
of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts
were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding
of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which
income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding
period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent,
the terms and manner of settlement.
In May 2014 the FASB issued Accounting Standards
Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes all existing revenue recognition
requirements, including most industry specific guidance. This new standard requires a company to recognize revenues when it transfers
goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services.
The FASB subsequently issued the following amendments to ASU No. 2014-09 that have the same effective date and transition date: ASU No.
2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations; ASU No. 2016-10, Revenue from Contracts
with Customers (Topic 606): Identifying Performance Obligations and Licensing; ASU No. 2016-12, Revenue from Contracts with Customers
(Topic 606): Narrow-Scope Improvements and Practical Expedients; and ASU No. 2016-20, Technical Corrections and Improvements to Topic
606, Revenue from Contracts with Customers. The Company adopted these amendments with ASU 2014-09 (collectively, the new revenue standards).
Revenues are recognized when control of the promised
goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange
for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be
recognized as it fulfills its obligations under each of its agreements:
Step 1: Identify the contract(s) with customers
Step 2: Identify the performance obligations in
the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to performance
obligations
Step 5: Recognize revenue when the entity satisfies
a performance obligation
Service revenues are recognized as the services
are performed in proportion to the transfer of control to the customer and real estate revenues are recognized at the time of sale when
consideration has been exchanged and the title has been conveyed to the buyer. At this time, we have not identified specific planned revenue
streams.
Under the provisions of ASC 260, “Earnings
per Share,” basic loss per common share is computed by dividing net loss available to common shareholders by the weighted average
number of shares of common stock outstanding for the periods presented. Diluted net loss per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance
of common stock that would then share in the income of the Company, subject to anti-dilution limitations.
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March 31,2022 | | |
March 31,2021 | |
| Weighted average common shares outstanding—basic | |
| 44,077,038 | | |
| 1,104,845,140 | |
| Dilutive common stock equivalents | |
| | | |
| | |
| Weighted average common shares outstanding—diluted | |
| 44,077,038 | | |
| 1,104,845,140 | |
| Net loss per share: | |
| | | |
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Realized gains (losses) occur when the Company
redeems all or a portion of its investment or when the Company receives cash income, such as dividends or distributions. Unrealized appreciation
(depreciation) results from changes in the fair value of the underlying investment as well as from the reversal of previously recognized
unrealized appreciation (depreciation) at the time an investment is realized. Realized and unrealized gains (losses) are presented together
as realized and unrealized gains (losses) in the condensed combined and consolidated statements of operations.
The Company accounts for income taxes using the
asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences
of events that have been recognized in the Company’s financial statements or tax returns. In estimating future tax consequences,
the Company generally considers all expected future events other than enactments of changes in the tax law. For deferred tax assets, management
evaluates the probability of realizing the future benefits of such assets. The Company establishes valuation allowances for its deferred
tax assets when evidence suggests it is unlikely that the assets will be fully realized.
The Company recognizes the tax effects of an uncertain
tax position only if it is more likely than not to be sustained based solely on its technical merits as of the reporting date and then
only in an amount more likely than not to be sustained upon review by the tax authorities. Income tax positions that previously failed
to meet the more likely than not threshold is recognized in the first subsequent financial reporting period in which that threshold is
met. Previously recognized tax positions that no longer meet the more likely than not threshold is derecognized in the first subsequent
financial reporting period in which that threshold is no longer met. The Company classifies potential accrued interest and penalties related
to unrecognized tax benefits within the accompanying consolidated statements of operations and comprehensive income (loss) as income tax
expense.
Other comprehensive income consists of net income and other appreciation
(depreciation) affecting the Company that, under GAAP, are excluded from net income.
In June 2016, the FASB issued ASU 2016-13, Measurement
of Credit Losses on Financial Instruments (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).
ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration
of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years
beginning after December 15, 2022, including those interim periods within those fiscal years. We did not expect the adoption of this guidance
have a material impact on its consolidated financial statements.
The accompanying unaudited financial statements
have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal
course of business. The Company has accumulated loss of $ as of March 31, 2022. These conditions raise substantial doubt about
the ability of the Company to continue as a going concern.
The ability of the Company to continue as a going
concern is dependent upon its abilities to generate revenues, to continue to raise investment capital, and develop and implement its business
plan. No assurance can be given that the Company will be successful in these efforts.
On August 3rd, 2021, Finra gave final
approval for the Company’s 100:1 reverse stock split, as noted in our 8K filed that day.
The Company is authorized to issue up to 500,000,000
shares of common stock, par value $0.001 per share. Each outstanding share of common stock entitles the holder to one vote per share on
all matters submitted to a stockholder vote. All shares of common stock are non-assessable and non-cumulative, with no pre-emptive rights.
Additionally, The Company Authorizes and hereby
creates 5,000,000 (Five Million) shares of preferred stock, with conversion rights of 1:1 (one to one), but with 30:1 voting rights.
During the Three months ending March 31, 2022,
shares of common and shares of preferred were issued and outstanding.
As
of September 20th, 2021, we acquired multiple membership interests in advance in real estate. The Consideration for
this transaction on the part of the Company was the issuance of 17,750,000 common shares and 1,000,000 Preferred shares with 1:1 conversion,
and 30:1 voting ratio. The stock value of the investment is described below.
The primary operation for these transactions is
retail stores, apartment buildings, and centers which are either owned or held under long-term operating leases. The Company holds noncontrolling
interests in these ventures and accounts for them under the equity method of accounting.
The table below presents venture investments
for which the Company held an ownership interest at March 31, 2022.:
(1)
Representing six commercial properties; (2) representing a mix of commercial retail, multifamily, and mixed-use
properties retails and apartments.
Noncontrolling interests represent the portion
of the equity that the Company does not own in entities it consolidates as a result of having a controlling interest or determining
that the Company was the primary beneficiary of a Variable Interest Entities (VIE) in accordance with the provisions of the FASB’s
Consolidation guidance. The Company accounts and reports for noncontrolling interests in accordance with the Consolidation guidance
and the Distinguishing Liabilities from Equity guidance issued by the FASB. The Company identifies its noncontrolling interests separately
within the equity section on the Company’s Condensed Consolidated Balance Sheets. The amounts of consolidated net income attributable
to the Company and to the noncontrolling interests are presented separately on the Company’s Condensed Consolidated Statements of
Operations.
In connection with the Merger, the Company acquired
ownership interests in eight consolidated ventures which have noncontrolling interests of $ as of March 31, 2022.
On April 8th, 2021, the
Company executed a Senior Secured Convertible Promissory Note, Securities Purchase Agreement, and ancillary agreements (collectively,
the “Agreements”) with Leonite Capital, LLC Per the terms of the Agreements with Leonite Capital, LLC, the Company may borrow
up to $; of which $ was tendered, which is open with right of redemption for one year. Prior to the maturity date of the
Note, the Company at its option, has the right to redeem in cash in part or in whole, the amounts outstanding. Should the Fund wish to
convert this debt into equity, the conversion price shall be sixty-five percent of the lowest Intraday price during the previous 21 days.
Pursuant to the Agreements,
the Company has earmarked the net proceeds for immediate cash infusion for normative working capital purposes and capital expenditures.
Leonite Capital. has agreed that neither it nor any of its affiliates shall engage in any short-selling or hedging of our Common Stock
during any time. The foregoing is a summary description of certain terms of the Agreements. For a full description of all terms, please
refer to the original Agreements which are Exhibits to the 10Q filed with SEC on Aug 16, 2021 for the quarter ended June 30, 2021.
Convertible notes payable,
consist of the following at March 31, 2022:
On November 30th,
2021, the Company executed a short-term loan of $1,000,000 Secured Note, by million shares of CRDV stock (reserved in bank’s
name, subject to loan and stock pledge agreement with NextBank International, Inc,) and secured by the president of the company, as a
personal guarantor.
Per the terms of the
Agreements with NextBank International, Inc, the Company may borrow up to $; which is open with the right of redemption for one
year against the collateral of shares of CRDV stock.
The Private Note has a % fixed rate that matures on . As of March 31, 2022, the company has withdrawn the full amount net of the loan less the loan fees.
Note 9:
The Company is exposed to certain risks arising
from both business operations and economic conditions, including interest rate risk. To mitigate the impact of interest rate, the Company
enters into derivative financial instruments. The Company maintains the majority of its overall interest rate exposure on floating rate
borrowings to a fixed-rate basis.
Derivative Instruments
The fair value of interest rate swaps is included within Other non-current
liabilities in the Consolidated Balance Sheets. The Company does not net derivatives in the Consolidated Balance Sheets.
Note 10 –
On September 20th, 2021, the Company
entered into a Merger Agreement with Red Hill Capital Advisors, LLC, by which the Company has acquired a portfolio of membership interests
in multiple venture companies which have a mix of commercial retail, multifamily, and mixed-use properties, in the Washington, DC Metro
area. All the properties are both partially occupied and under continued development. The Consideration for this transaction on the part
of the Company was the issuance of 17,750,000 common shares and 1,000,000 Preferred shares with 1:1 conversion, and 30:1 voting ratio.
On October 15th, 2021, the Company issued these shares.
The president of the company, Mr. Garfield Antonio
is the managing member of each project where the company owns membership interest through the Red Hills Capital Advisors, which is a wholly-owned
subsidiary of the company.
Note 11 –
On April 8th, 2021, the Company
executed a Senior Secured Convertible Promissory Note, Securities Purchase Agreement and ancillary agreements (collectively, the “Agreements”)
with Leonite Capital, LLC Per the terms of the Agreements with Leonite Capital, LLC, the Company may borrow up to $500,000; of which $500,000
was tendered, which is open with right of redemption for one year. Prior to the maturity date of the Note, the Company at its option,
has the right to redeem in cash in part or in whole, the amounts outstanding. Should the Fund wish to convert this debt into equity, the
conversion price shall be sixty-five percent of the lowest Intraday price during the previous 21 days. Pursuant to the Agreements, the
Company has earmarked the net proceeds for immediate cash infusion for normative working capital purposes and capital expenditures. Leonite
Capital. has agreed that neither it nor any of its affiliates shall engage in any short-selling or hedging of our Common Stock during
any time. The foregoing is a summary description of certain terms of the Agreements. For a full description of all terms, please refer
to the original Agreements which are Exhibits to this filing.
We will require additional financing to implement
our business plan, which may include joint venture projects and debt or equity financings. The nature of this enterprise and constraint
of positive cash flow places debt financing beyond the credit-worthiness required by most banks or typical investors of corporate debt
until such time as an economically viable profits and losses can be demonstrated. Therefore, any debt financing of our activities may
be costly and result in substantial dilution to our stockholders.
Future financing through equity investments is
likely to be dilutive to existing stockholders. Also, the terms of securities we may issue in future capital transactions may be more
favorable for our new investors. Newly issued securities may include preferences, superior voting rights, and the issuance of warrants
or other derivative securities, which may have additional dilutive effects. Further, we may incur substantial costs in pursuing future
capital and financing, including investment banking fees, legal fees, accounting fees, and other costs. We may also be required to recognize
non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact
our financial condition.
Our ability to obtain needed financing may be
impaired by such factors as the capital markets, which could impact the availability or cost of future financings. If the amount of capital
we are able to raise from financing activities, together with our revenue from operations, is not sufficient to satisfy our capital needs,
even to the extent that we reduce our operations accordingly, we may be required to cease operations.
There is no assurance that we will be able to
obtain financing on terms satisfactory to us, or at all. We do not have any arrangements in place for any future financing. If we are
unable to secure additional funding, we may cease or suspend operations. We have no plans, arrangements or contingencies in place in the
event that we cease operations.
The Company’s guarantees
primarily relate to requirements under certain financial obligations and some contracts and have arisen through the normal course of business.
These guarantees, with certain financial institutions, have both open and closed-ended terms; with remaining closed-ended terms up to 1.0 years
and maximum potential future payments of approximately $1million in the aggregate.
The company’s short-term loan with NextBank
International of $1,000,000 listed on note 7 is secured by the President of the company Mr. Garfield Antonio as a personal guarantor,
and the company has borrowed the full amount.
As
of March 31, 2022, our membership interests valued at $18,471,239 through our wholly owned subsidiary Red Hills Capital Advisors is managed
by our President and Director.
The Company has evaluated subsequent events through
May 14, 2022, the date on which these financial statements were issued, and has determined there are no material subsequent events
to disclose.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Special Note Regarding Forward-Looking Statements
THE FOLLOWING DISCUSSION
CONTAINS FORWARD-LOOKING STATEMENTS THAT REFLECT OUR PLANS, ESTIMATES AND BELIEFS. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED BELOW
AND ELSEWHERE IN THIS QUARTERLY REPORT.
FORWARD-LOOKING STATEMENTS
This quarterly report
on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and
other Federal securities laws and is subject to the safe-harbor created by such Act and laws. Forward-looking statements may include
statements regarding our goals, beliefs, strategies, objectives, plans, including product and technology developments, future financial
conditions, results or projections or current expectations. These forward-looking statements involve known or unknown risks, uncertainties
and other factors that may cause the actual results, performance, or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as “may,” “should,” “potential,” “continue,” “expects,”
“anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions.
These statements are based on our current beliefs, expectations, and assumptions and are subject to a number of risks and uncertainties.
Although we believe that the expectations reflected-in the forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Our actual results may differ materially from those anticipated in these forward-looking
statements. These forward-looking statements are made as of the date of this report, and we assume no obligation to update these forward-looking
statements whether as a result of new information, future events, or otherwise, other than as required by law. In light of these assumptions,
risks, and uncertainties, the forward-looking events discussed in this report might not occur and actual results and events may vary significantly
from those discussed in the forward-looking statements.
Implications of Being an Emerging Growth
Company
We are an Emerging Growth
Company as defined in Section 2(a)(19) of the Securities Act of 1933, as amended, or the Securities Act. We will continue to be an emerging
growth company until: (i) the last day of our fiscal year during which we had total annual gross revenues of at least $1.07 billion; (ii)
the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective
registration statement under the Securities Act; (iii) the date on which we have, during the previous 3-year period, issued more than
$1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a large accelerated filer, as defined in Section 12b-2
of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which means the market value of our common stock that is held
by non-affiliates exceeds $700 million as of the prior June 30.
As an emerging growth company, we are exempt
from:
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Sections 14A(a) and (b) of the Exchange Act, which require companies to hold stockholder advisory votes on executive compensation and golden parachute compensation. |
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The requirement to provide, in any registration statement, periodic report or other reports to be filed with the Securities and Exchange Commission, or the “Commission” or “SEC”, certain modified executive compensation disclosure under Item 402 of Regulation S-K or selected financial data under Item 301 of Regulation S-K for any period before the earliest audited period presented in our initial registration statement. |
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Compliance with new or revised accounting standards until those standards are applicable to private companies; |
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The requirement under Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, to provide auditor attestation of our internal controls and procedures; and |
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Any Public Company Accounting Oversight Board, or “PCAOB”, rules regarding mandatory audit firm rotation or an expanded auditor report, and any other PCAOB rules subsequently adopted unless the Commission determines the new rules are necessary for protecting the public. |
We have elected to use
the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the Jumpstart Our Business
Startups Act.
We are also a smaller reporting company as
defined in Rule 12b-2 of the Exchange Act. As a smaller reporting company, we are not required to provide selected financial data pursuant
to Item 301 of Regulation S-K, nor are we required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley
Act of 2002. We are also permitted to provide certain modified executive compensation disclosure under Item 402 of Regulation S-K.
Company Overview
Community Redevelopment,
Inc. was formed on August 16, 2010, as Crosswind Renewable Energy Corp. an Oklahoma corporation and was formally renamed as Community
Redevelopment Inc. on June 24th, 2020. We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012
(“JOBS Act”). We were established to build upon community assets through real estate, financial services and technology. Our
experienced team has dedicated their careers to constructing high-quality mixed-use, multifamily residential, and commercial properties
in top metropolitan regions as well as have deep roots in technology and finance industries. Our vision is to integrate our real estate
development proprietary business model across multiple verticals in finance, technology, and real estate. This will provide long-term
value to investors while staying true to our mission of enhancing communities.
Our focus is to invest
primarily in real estate, technology and finance opportunities in the United States. Our board of directors will at all times have oversight
and policy-making authority over us, including responsibility for governance, financial controls, compliance and disclosure.
On September 20th,
2021, the Company executed a Merger Agreement with Red Hills Capital Advisors, LLC, by which the Company has now acquired a portfolio
of membership interests in six commercial, retail, multifamily and mixed-use properties, in revitalized areas in the Washington, DC Metro
area. All the properties are both partially occupied and under continued development. As of the year ending December 21, 2021, the Company
has filed with the SEC a Registration offering of up to $25 million in shares of common stock.
Community Redevelopment
can help impact economic mobility by focusing on partnerships between the public and private sector to generate both business interest
and business activity in low-income neighborhoods that have gone unnoticed by the development community at large while repairing and mending
relationships in these underserved communities. Our Company intends to work with other real estate developers, as well as local and state
government agencies to implement the community’s vision for our projects. We are confident in our ability to deliver community-centric
projects because we have built a team that understands the challenges facing underserved communities from living and working in them.
Our diverse team is our strength. Towards this goal, on September 20th, 2021, the Company executed a Merger Agreement with
Red Hills Capital Advisors, LLC, by which the Company has now acquired a portfolio of membership interests in six commercial, retail,
multifamily and mixed-use properties, in revitalized areas in the Washington, DC Metro area. All the properties are both partially occupied
and under continued development. Red Hills Capital Advisors LLC is headed by Garfield Antonio, our President, Director and Board Member
as disclosed in our 8-K of July 12th, 2021.
Our Company is graciously
endowed with an expert management team that has extensive experience in acquiring, developing, constructing, and managing high-quality
multifamily, and retail properties in attractive markets throughout the Mid-Atlantic and Southeastern United States. The Company is focused
on all aspects of the real estate development cycle including land development, design-build, property operations, and site redevelopment.
In addition to the ownership of our operating property portfolio, Community Redevelopment plans to develop and build desirable properties
for its own account and through ventures with affiliated and unaffiliated partners.
Community Redevelopment,
Inc. is focused on community development in urban and suburban markets and our mission is to integrate our proprietary business model
by providing sustainable, long-term value to investors as we strive to provide opportunities to improve neighborhoods with residential,
commercial, and industrial development projects while designing architecturally pleasing, clean, energy-efficient communities and commercial
structures.
Properties Acquired
by the Red Hills Capital Advisors LLC.
As
of September 20th, 2021, we acquired membership interests in advance in real estate. The Consideration for this transaction
on the part of the Company was the issuance of 17,750,000 common shares and 1,000,000 Preferred shares with 1:1 conversion, and 30:1
voting ratio. The stock value of the investment is described below:
| | |
Ownership | |
The Company’s Investment | |
| Venture | |
Interest | |
March 31, 2022 | |
| Red Hills Capital Advisors: | |
| |
| | |
| Fort Washington Livingston Pace, LLC (1) | |
24.50% | |
$ | 5,066,359 | |
| Suitland Holdings Pace A and Pace B, LLC | |
24.50% | |
| 2,236,430 | |
| Velocity Ventures, LLC | |
49.00% | |
| 302,482 | |
| Marlow Heights Branch Pace, LLC | |
24.50% | |
| 671,576 | |
| Capheights Hill Pace, LLC | |
24.50% | |
| 134,750 | |
| Capheights Central Dev, LLC (2) | |
24.50% | |
| 5,320,331 | |
| Capheights Velocity Services, LLC | |
24.50% | |
| 465,872 | |
| COZ Manager,LLC (2) | |
12.25% | |
| 4,273,439 | |
| Total | |
| |
$ | 18,471,239 | |
Community Redevelopment
owns membership interests in multiple properties in the Washington DC metropolitan region, which are comprised of retail, multifamily,
and mixed-use development projects. Our acquisition strategy is based on acquiring quality, well-positioned real estate in markets with
robust growth and demographics, anchored by strong tenants. The Washington D.C. metropolitan area remains strong as a result of increased
government spending. These properties are located in a market that is thriving and generating robust job growth with significant demand
for housing.
We anticipate acquiring
several properties and expanding into other markets. Community Redevelopment Inc. is currently seeking additional opportunities in the
Mid Atlantic, Southeast, and Gulf Coast states markets. Community Redevelopment's acquisition strategy is based on acquiring quality,
well-positioned real estate in markets with robust growth and demographics, anchored by strong tenants. Our aim is to approach acquisition
and development thoughtfully by developing and constructing high-quality, well-located projects at cost, for its stabilized portfolio
or to sell with full market value-added for a profit. The Company also plans to partner with other developers to build or acquire fractional
or membership interests in economically viable projects. Community Redevelopment’s business model creates a tremendous advantage
in the marketplace while providing long-term value. Our ability to acquire and develop single and multi-family rental properties that
can either be held by us or sold to regional and national companies, further strengthens our market standing. We believe our strategy
of working with federal, state, and local governments, as well as community leaders and other developers in our principal geographic areas
and our targeted areas for expansion, will provide us with a diverse product portfolio and an opportunity to increase our overall market
share and value
Community Redevelopment,
Inc. is not an opportunity zone fund or a real estate investment trust. Community Redevelopment, Inc. is a real estate developer offering
potential investors an opportunity to participate in the process of investing in real estate projects that could improve the quality of
life for residents of low-income neighborhoods, via a publicly traded company. The Company intends to work with other real estate developers,
as well as local and state government agencies to complete its projects in these communities.
Community Redevelopment,
Inc. operates as a community-oriented real estate redeveloper targeting economic growth and opportunity zones in secondary and tertiary
value-added markets. The Company is primarily focused on opportunity zones in an effort to bring commerce and affordable housing to underserved
areas. Community Redevelopment plans to provide numerous opportunities to improve low-income neighborhoods for residential, commercial,
and industrial opportunities through government incentives, long-term partnerships, and agreements. Our mission is to rebuild depressed,
underserved communities, improve the quality of life in those markets, and provide our investors with an opportunity to profit. We intend
to accomplish this by focusing on partnerships between the public and private sector to generate both business interest and business activity
in low-income neighborhoods that have gone unnoticed by the development community at large while repairing and mending relationships in
these underserved communities.
The Company is not a
“shell company,” since its filing of its Form 10 with the SEC on January 19, 2021. merger with Red Hills Capital Advisors
in September, as it has formal operations, emplaced Board, an Audit Committee and actively pursuing several current projects, despite
having no significant cash on hand since the change in control of July 6th, 2020. As of March 31, 2022, the Company had $669,272
in cash. The Company intends to comply with the periodic reporting requirements of the Exchange Act for so long as it is subject to those
requirements.
The Company’s current
management believes the advantages of being a publicly held corporation will enable it to project further and faster growth during this
market downturn. The Company’s principal business objective for the next 12 months and beyond such time will be to achieve long-term
growth potential through community-private partnerships within different US jurisdictions.
During the remainder
of the fiscal year and beyond such time, we anticipate incurring costs related to the filing of Exchange Act reports, and investigating,
analyzing, and consummating further local partnerships. We believe we will be able to meet these costs through the use of funds to be
loaned by or invested in us by our stockholders, management or other investors. Our management and stockholders have indicated their intent
to advance funds on behalf of the Company as needed in order to accomplish its business plan and comply with its Exchange Act reporting
requirements; however, there are no agreements in effect between the Company and our management and stockholders specifically requiring
that they provide any funds to the Company. As a result, there are no assurances that such funds will be advanced or that the Company
will be able to secure any additional funding as needed.
While the Company has
limited assets and no revenues to date, the Company has an exceptionally experienced management in finance, politics, and business and
has unrestricted flexibility in seeking, analyzing and participating in potential urban renewal opportunities in the area of community
redevelopment. In its efforts to analyze potential ventures, the Company will consider the following kinds of factors:
(a)
potential for growth, indicated by local need and assigned local, state or federal funding and incentives towards urban renewal in that
given locale.
(b)
competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry
as a whole.
(c)
strength and diversity of current management.
(d)
capital requirements and anticipated availability of required funds, to be provided by the Company or from operations, through ventures
or similar arrangements, sales of securities, or from other sources.
(e)
the extent to which the business opportunity can be advanced; and
In applying the foregoing
criteria, not one of which will be definitive, management will attempt to analyze all factors and circumstances and make a determination
based upon reasonable investigative measures and available data. Potentially available urban renewal opportunities may occur in many different
locales, and at various stages of development, all of which will make the task of comparative investigation and analysis of such urban
renewal opportunities extremely difficult and complex. Due to the Registrant’s limited capital available for investigation, the
Registrant may not discover or adequately evaluate adverse facts about the opportunity to be engaged. In addition, we will be competing
against other entities that possess greater financial, technical, and managerial capabilities for identifying and completing new projects.
In evaluating a prospective
new project, we will conduct as extensive a due diligence review of potential targets as possible given our dependence upon the ever-changing
city, state, and federal funding initiatives for urban redevelopment and our limited financial resources. We expect that our due diligence
will encompass, among other things, meetings with the local government officials and inspection of its neighborhoods and infrastructure,
as necessary, as well as a review of financial, government statistical data and other information which is made available to us. This
due diligence review will be conducted primarily by our management or by unaffiliated third parties we may engage, including but not limited
to attorneys, accountants, consultants or other such professionals. The costs associated with hiring third parties as required to complete
a new project may be significant and are difficult to determine as such costs may vary depending on a variety of factors, including the
locale, amount of time it takes to complete a new project, the location of the project, and the size and complexity of the business of
the project. As of the date of this filing, the Company has identified several potential business opportunities. The Company is currently
in discussions with several but not limited to developers, real estate owners, property management companies in California, Colorado,
Florida, Georgia, Maryland, Ohio, and Texas to either acquire, design, and or redevelop properties.
Our limited funds will
likely make it difficult to conduct a complete and exhaustive investigation and analysis of a target project at this early stage without
bringing on strategic local partners, which is part of our business plan, see infra. As a general rule, it normally requires
approximately 3-6 months to carry out due diligence and meeting with local and state officials, and approximately 9-12 months to follow
through to completion. The estimated costs for this period and need are anywhere from approximately $750,000 to $1,500,000.
The time and costs required
to select and evaluate a target project and to structure and complete a new project cannot presently be ascertained with any degree of
certainty. The amount of time it takes to complete a new project, the location of the project, the size and complexity of the project
neighborhood, the scope of city, state, and federal regulations, and whether funds may be raised contemporaneously with the transaction
are all factors that determine the costs associated with completing a new project transaction. The time and costs required to complete
a new project can be estimated once a new project target has been identified. Any costs incurred with respect to the evaluation of a prospective
new project that is not ultimately completed will result in a loss to us.
Through information obtained
from industry professionals including attorneys, architects, developers, appraisers, accountants, commercial and residential real estate
brokers, builders, engineers as well as other consultants with experience in the urban redevelopment sphere, there are literally thousands
of new potential projects, and the aim of the management is to filter through these for the most reasonably achievable urban renewal projects.
We are and will continue
for the foreseeable future to be, an insignificant participant on the national level of public-private urban renewal.
Nearly all similar companies
have significantly greater financial resources; consequently, we will be at a competitive disadvantage in identifying possible urban renewal
opportunities and successfully completing a new project. These competitive factors may reduce the likelihood of our identifying and consummating
a successful new project.
Some of our officers
are engaged in outside business activities, and as such will be dividing their time amongst these entities and anticipate that they will
devote less than full time to our business until the successful project has been identified. The specific amount of time that management
will devote to the Company may vary from week to week or even day to day, and therefore the specific amount of time that management will
devote to the Company on a weekly basis cannot be ascertained with any level of certainty. In all cases, management intends to spend as
much time as is necessary to exercise their fiduciary duties as an officer and/or director of the Company and believes that they will
be able to devote the time required to consummate a new project transaction as necessary. We expect no significant changes in the number
of our employees other than such changes, if any, incident to a new project. We are, however, strengthening our corporate structure, and
on May 14th, 2021, the Board appointed Stalin Cruz as the Company’s new Chief Financial Officer. On June 15th,
2021, the Board appointed Mr. Joe Gibbons as an Independent Board Member and to the Audit Committee, On June 17th, 2021, the
Company appointed Mr. Randy Avon as an Independent Board Member and to the Audit Committee. And on June 18th, 2021, the Board
appointed its current Director and Chair Mr. Ronald Silver to the Audit Committee, as seen on the 8K filed on that day. On July 12th,
Garfield Antonio was named as Director and Board member, as seen in the 8K filed that day.
Basis of Presentation
The accompanying unaudited
financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.
GAAP”) for quarterly financial statement presentation and in accordance with Form 10-Q. Accordingly, they include all of the information
and footnotes required in quarterly financial statements. In the opinion of management, the unaudited financial statements contain all
adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of operations
and cash flows. The results of operations presented are not necessarily indicative of the results to be expected for any other interim
period or for the entire year.
These unaudited financial
statements should be read in conjunction with our December 31st, 2021, audited annual financial statements included in our
Form 10-K, filed with the SEC on April 1st, 2022.
Going Concern
Due to the uncertainty
of our ability to meet our current operating and capital expenses, our independent auditors included an explanatory paragraph in their
report on the audited financial statements for the year ended December 31, 2021, regarding concerns about our ability to continue as a
going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure
by our independent auditors.
Our unaudited condensed
financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities
in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations
in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business
operations when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial
doubt that we will be able to continue as a going concern. Our unaudited financial statements do not include any adjustments to the amount
and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern. There is no assurance
that our operations will be profitable. Our continued existence and plans for future growth depend on our ability to obtain the additional
capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity. Our future
growth is dependent upon achieving further development projects and execution of development projects, engaging other company related
opportunities, management of operating expenses, and the ability of the Company to obtain the necessary financing to fund future obligations,
and upon profitable operations.
Stockholders’
Equity
Since its inception
on August 16, 2010, the Company had accumulated deficit of $49,425,056 as of three months ended March 31, 2022.
The aggregated loss is
related to the capital invested in advances real estate membership interest, which has future positive cash flow after completion and
stabilization. See note 5.
Authorized Shares
Common Stock
The Company is authorized
to issue up to 500,000,000 shares of common stock, par value $0.001 par value. Each outstanding share of common stock entitles the holder
to one vote per share on all matters submitted to a stockholder vote. All shares of common stock are non-assessable and non-cumulative,
with no pre-emptive rights. As of March 31, 2022, 44,077,038 shares of common stock were issued and outstanding.
Preferred shares
The Company Authorizes and hereby creates 5,000,000
(Five Million) shares of preferred stock, with conversion rights of 1:1 (one to one), but with 30:1 voting rights. As of March 31, 2022,
1,000,000 shares of preferred stock were issued and outstanding.
Commitments and Contingencies
On April 8th,
2021, the Company executed a Senior Secured Convertible Promissory Note, Securities Purchase Agreement, and ancillary agreements (collectively,
the “Agreements”) with Leonite Capital, LLC Per the terms of the Agreements with Leonite Capital, LLC, the Company may borrow
up to $500,000; of which $500,000 was tendered, which is open with right of redemption for one year. Prior to the maturity date of the
Note, the Company at its option, has the right to redeem in cash in part or in whole, the amounts outstanding. Should the Fund wish to
convert this debt into equity, the conversion price shall be sixty-five percent of the lowest Intraday price during the previous 21 days.
Pursuant to the Agreements, the Company has earmarked the net proceeds for an immediate cash infusion for normative working capital purposes
and capital expenditures. Leonite Capital. has agreed that neither it nor any of its affiliates shall engage in any short-selling or hedging
of our Common Stock during any time. The foregoing is a summary description of certain terms of the Agreements. For a full description
of all terms, please refer to the original Agreements which are Exhibits to this filing.
On November 30th,
2021, the Company executed a short-term loan of $1,000,000 Secured Note, by 1,500,000 million shares of CRDV stock (reserved in bank’s
name, subject to loan and stock pledge agreement with NextBank International, Inc,) and secured by the president of the company, as a
personal guarantor. Per the terms of the Agreements with NextBank International, Inc, the Company may borrow up to $1,000,000; which is
open with the right of redemption for one year against the collateral of 1,500,000 shares of CRDV stock and the President of the company
Mr. Garfield Antonio personal guarantor.
The Private Note has
a 7.5% fixed rate that matures on November 30, 2022. As of March 31, 2022, the company has withdrawn the full amount net of the loan less
the loan fees. For a full description of all terms, please refer to the original Agreements which are Exhibits to this filing.
We will require additional
financing to implement our business plan, which may include joint venture projects and debt or equity financings. The nature of this enterprise
and constraint of positive cash flow places debt financing beyond the creditworthiness required by most banks or typical investors of
corporate debt until such time as economically viable profits and losses can be demonstrated. Therefore, any debt financing of our activities
may be costly and result in substantial dilution to our stockholders.
Future financing through
equity investments is likely to be dilutive to existing stockholders. Also, the terms of securities we may issue in future capital transactions
may be more favorable for our new investors. Newly issued securities may include preferences, superior voting rights, and the issuance
of warrants or other derivative securities, which may have additional dilutive effects. Further, we may incur substantial costs in pursuing
future capital and financing, including investment banking fees, legal fees, accounting fees, and other costs. We may also be required
to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will
adversely impact our financial condition.
Our ability to obtain
needed financing may be impaired by such factors as the capital markets, which could impact the availability or cost of future financings.
If the amount of capital we are able to raise from financing activities, together with our revenue from operations, is not sufficient
to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to cease operations.
There is no assurance
that we will be able to obtain financing on terms satisfactory to us, or at all. We do not have any arrangements in place for any future
financing. If we are unable to secure additional funding, we may cease or suspend operations. We have no plans, arrangements, or contingencies
in place in the event that we cease operations.
Results of Operations
For the Three Months Ended March 31,
2022, and 2021
Revenues
The Company has
not brought in revenues to date.
Operating Expenses
For the three months
ended March 31, 2022, our total operating expenses were $298,649 compared to $4,523,771 for the three months ended March 31, 2021, resulting
in a decrease of $4,225,122. The decrease is attributable to a total decrease of $4,225,122 in general administration expenses.
Net Operating loss
Net Operating loss was
$298,649 compared to net Operating loss of $4,523,771 for the three months ended March 31, 2022, and March 31, 2021, for the reasons explained
above.
Net loss
Net loss was $148,376
compared to a net loss of $4,523,771 for the three months ended March 31, 2022, and March 31, 2021. The decrease is attributable to a
total decrease of $4,375,395 in general administration expenses.
Other Income
Other Income/(Expense)
increased to $150,273 for the period ended March 31, 2022, and $0 for the period ended March 31, 2021. The increase was directly related
to the swings in derivative fair values from $364,737. This was offset by an increase in interest expense of $214,464 when compared to
the period ended March 31, 2021.
Liquidity and Capital
Resources
Overview
The Company’s cash
and cash equivalents balance were $669,272 as of March 31, 2022.
Net cash used in the
Company’s operating activities during the three months ended March 31, 2022, was $415,214 as compared to net cash used in the operating
activities of $6,959 during the corresponding period ended March 31, 2021. The change was primarily due to decrease in net loss, general
administration expenses and increased prepaid expenses of $84,333, changes in fair value of derivative liabilities $ 183,745, an increase
in accrued expenses of $4,000, a decrease in accounts payable of $15,051 and an increase of $12,292 in the interest payable between the
two periods.
Net cash used in investing activities for
the quarter ended March 31, 2022, and 2021 was $0 and $0, respectively.
Net cash used in financing
activities for the quarter ended March 31, 2022, and 2021 was $0 and $0, respectively.
Since its inception on
August 16, 2010, the Company had a cumulative deficit of $49,425,056 and we have a working capital deficit of $17,253,289 as of March
31, 2022. Our future growth is dependent upon achieving further purchase orders and execution, management of operating expenses and the
ability of the Company to obtain the necessary financing to fund future obligations, and upon profitable operations.
Historically, we have
financed our cash flow and operations from contributions of our majority shareholder and by raising equity and convertible loans.
As of March 31, 2022,
our cash balance was $669,272 we believe we will require a minimum of $1,500,000 in working capital over the next 12 months to grow the
company as currently planned, covering our operating costs and maintaining our regulatory reporting and filings. Should our revenues not
materialize as expected, or if our costs and expenses prove to be greater than we currently anticipate, or should we change our current
business plan in a manner that will increase or accelerate our anticipated costs and expenses; we may need funds in excess of that currently
planned.
It is our current policy
that all transactions between the Company and our officers, directors and their affiliates will be entered into only if such transactions
are approved by a majority of the existing directors, are approved by vote of the stockholders, or are fair to us as a corporation as
approved or ratified by our Board of Directors or authorized officer. We will conduct an appropriate review of all related party transactions
on an ongoing basis, and, where appropriate, we review the potential of conflicts of interest.
Off-Balance
Sheet Arrangements
We currently have
no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting
Policies and Estimates
Use of Estimates
In
preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”),
management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities as of the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during
the reporting period. Significant estimates and assumptions made by management include, but are not limited to, revenue recognition,
the allowance for bad debt, useful life of fixed assets, income taxes and unrecognized tax benefits, valuation allowance for deferred
tax assets, and assumptions used in assessing impairment of long-lived assets. Actual results could differ from those estimates.
Lease
On January 2, 2020, the Company
adopted FASB ASC Topic 842, Leases, or ASC 842, using the modified retrospective transition method with a cumulative effect adjustment
to accumulated deficit as of January 1, 2019, and accordingly, modified its policy on accounting for leases as stated below. As described
under “Recently Adopted Accounting Pronouncements,” below, the primary impact of adopting ASC 842 for the Company was the
recognition in the consolidated balance sheet of certain lease-related assets and liabilities for operating leases with terms longer
than 12 months. The Company elected to use the short-term exception and does not records assets/liabilities for short term leases as
of March 31, 2022.
Revenue Recognition
In
May 2014 the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606),
which supersedes all existing revenue recognition requirements, including most industry-specific guidance. This new standard requires
a company to recognize revenues when it transfers goods or services to customers in an amount that reflects the consideration that the
company expects to receive for those goods or services. The FASB subsequently issued the following amvendments to ASU No. 2014-09 that
have the same effective date and transition date: ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus
Agent Considerations; ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing;
ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients; and ASU No. 2016-20,
Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The Company adopted these amendments with
ASU 2014-09 (collectively, the new revenue standards).
Under the new revenue standards, the Company recognizes
revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects
to receive in exchange for those goods. The Company recognizes revenues following the five-step model prescribed under ASU No. 2014-09:
(i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction
price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we
satisfy the performance obligation. The Company recognized revenue from providing temporary and permanent staffing solutions and the sale
of consumer products. Service revenues are recognized as the services are performed in proportion to the transfer of control to the customer
and real estate revenues are recognized at the time of sale when consideration has been exchanged and title has been conveyed to the buyer.
At this time, we have not identified specific planned revenue streams. During the period from August 16, 2010 (Inception) to March 31,
2022, we did not recognize any revenue.
Income Taxes
The Company accounts for
income taxes using the asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. In estimating
future tax consequences, the Company generally considers all expected future events other than enactments of changes in the tax law.
For deferred tax assets, management evaluates the probability of realizing the future benefits of such assets. The Company establishes
valuation allowances for its deferred tax assets when evidence suggests it is unlikely that the assets will be fully realized.
The Company recognizes
the tax effects of an uncertain tax position only if it is more likely than not to be sustained based solely on its technical merits as
of the reporting date and then only in an amount more likely than not to be sustained upon review by the tax authorities. Income tax positions
that previously failed to meet the more likely than not threshold is recognized in the first subsequent financial reporting period in
which that threshold is met. Previously recognized tax positions that no longer meet the more likely than not threshold is derecognized
in the first subsequent financial reporting period in which that threshold is no longer met. The Company classifies potential accrued
interest and penalties related to unrecognized tax benefits within the accompanying consolidated statements of operations and comprehensive
income (loss) as the income tax expense.
Stock-based Compensation
Stock-based
compensation cost to employees is measured at the date of grant, based on the calculated fair value of the stock-based award, and will
be recognized as expense over the employee’s requisite service period (generally the vesting period of the award). Share-based compensation
awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value
of the share-based payment, whichever is more readily determinable. The company has no stock-based compensation plan established as of
March 31, 2022.
Derivative instruments
The
fair value of derivative instruments is recorded and shown separately under liabilities. Changes in the fair value of derivatives liability
are recorded in the consolidated statement of operations under other (income) expenses.
Our
Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as
embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially
recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements
of operations. For stock-based derivative financial instruments, the Company uses the binomial option-pricing model to value the derivative
instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are
classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could
be required within 12 months of the balance sheet date.
Related Parties
The
Company follows subtopic 850-10 of the FASB ASC for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20 related parties include:
a. affiliates of the Company;
b. entities for which investments
in their equity securities would be required, absent the election of the FV option under the FV Option Subsection of Section 825–10–15,
to be accounted for by the equity method by the investing entity;
c. trusts for the benefit
of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management;
d. principal owners of the
Company;
e. management of the Company;
f. other parties with which
the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent
that one of the transacting parties might be prevented from fully pursuing its own separate interests; and
g. other parties that can
significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the
transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented
from fully pursuing its own separate interests.
The
financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances,
and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation
of financial statements is not required in those statements.
The
disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions
to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other
information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts
of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing
the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented
and, if not otherwise apparent, the terms and manner of settlement.
New Accounting Pronouncements
In June 2016, the FASB issued
ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326): Measurement of Credit Losses on Financial Instruments
(“ASU 2016-13”). ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit
losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU
2016-13 is effective for fiscal years beginning after December 15, 2022, including those interim periods within those fiscal years. We
did not expect the adoption of this guidance have a material impact on its consolidated financial statements.