UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2018March 31, 2019

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File No. 333-218248000-192227

FORGE INNOVATION DEVELOPMENT CORP.

(Exact name of small business issuer as specified in its charter)

17800 Castleton Street, Suite 583

City of Industry, CA 91748

(Address of principal executive offices)

(626) 986-4566

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ☒   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐  No ☒

Securities registered pursuant to Section 12(b) of the Act:

The number of shares of Common Stock, $0.0001 par value, of the registrant outstanding at November 13, 2018,May 10, 2019, was 45,621,868.

FORGE INNOVATION DEVELOPMENT CORP.

QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 2018MARCH 31, 2019

TABLE OF CONTENTS

PART I

ITEM 1. FINANCIAL STATEMENTS

FORGEFRORGE INNOVATION DEVELOPMENT CORP.

INDEX TO FINANCIAL STATEMENTS

FORGE INNOVATION DEVELOPMENT CORP. 

CONDENSED BALANCE SHEETS

The accompanying notes are an integral part of these unaudited condensed financial statements.

FORGE INNOVATION DEVELOPMENT CORP.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed financial statements.

FORGE INNOVATION DEVELOPMENT CORP.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed financial statements.

FORGE INNOVATION DEVELOPMENT CORP.

STATEMENTS OF CASH FLOWSCHANGES IN SHAREHOLDER’S EQUITY

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed financial statements.

Forge Innovation Development Corp.

Notes to the unaudited financial statements

Note 1 - Organization and Description of Business

Forge Innovation Development Corp., or the “Company”, was initially incorporated in the State of Nevada on January 15, 2016 under the name of You-Go enterprises, LLC (the “Company Predecessor”). On November 3, 2016, the Company filed an amendment to its Articles of Incorporation in the State of Nevada to change the Company’s name to Forge Innovation Development Corp. Our current principle executive office is located at 17800 Castleton Street, Suite 583 City of Industry, CA 91748. Tel: 626-986-4566. The Company’s main business will be focus on real estate development, land purchasing and selling and property management. The Company’s common stock is currently traded on OTCQB under the symbol “FGNV”.

Development Stage Company 

The Company is considered to be in the development stage as defined in Statement of Financial Accounting Standards (SFAS) ASC 915, “Development Stage Entities”. The Company has devoted substantially all of its efforts to establishing a new business and for which either of the following conditions exists: planned principal operations have not commenced; or the planned principal operations have commenced, but there has been no significant revenue there from. The Company’s first sales activity was in March 2017 by the sale of real estate in Desert Springs, California. There were revenue from real estate management services during the ninethree months ended September 30, 2018.March 31, 2019. There is no assurance of any future revenues.

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation  

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted. 

Property and equipment

Property and equipment are carried at cost and are depreciated on a straight-line basis (after taking into account their respective estimated residual value) over 5 years, the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.

During the nine months ended September 30, 2018 and 2017, the depreciation expense were $3,865 and $0, respectively.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (ASC 606)”. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The new standard was effective for us beginning January 1, 2018, with early adoption permitted. The Company elected to adopt the new standard effective January 1, 2018. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). The Company elected adopting the standard using the modified retrospective method. The Company has identified its revenue streams and assessed each for the impacts. (See Note 3 for additional information)

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. Under the new guidance, lessees will be required to recognize all leases (with the exception of short-term leases) at the commencement date including a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use (ROU) asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Lessees may not apply a full retrospective transition approach. The standard will be effective for us beginning January 1, 2019, with early adoption permitted. We plan to adopt the standard effective January 1, 2019. We anticipate this standard will have a material impact on our balance sheets. However, we do not expect adoption will have a material impact on our income statements. While we are continuing to assess potential impacts of the standard, we currently expect the most significant impact will be the recognition of ROU assets and lease liabilities for operating leases.

Note 3 - Revenue Recognition

On January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers, using the modified retrospective approach, which applies the new standard to contracts that are not completed as of the date of adoption. Under the new standard, revenue is recognized upon transfer of control of promised goods and services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those goods and services. The Company concluded that the adoption of the new standard requires an adjustment to increase the opening balance of retained earnings in an amount of $ 26,667 since control of real estate was transferred and profit on a real estate sale should be recognized under the new standard.

Revenue streams that are scoped into ASU 2014-09 include:

Property management services: The Company deals directly with prospects and tenants for the owners of properties, which mainly includes marketing property, collecting rent, handling maintenance, repairing issues and responding to tenant complaints. The Company recognizes revenue as earned on a monthly basis and has concluded this is appropriate under the new standard.

Real estate sales: The Company accounts for the sale of real estate assets and any related gain recognition in accordance with the accounting guidance applicable to sales of real estate, which establishes standards for recognition of profit on all real estate sales transactions, other than retail land sales. The Company recognizes the sale, and associated gain or loss from the disposition, provided that the earnings process is complete, and the Company does not have significant continuing involvement. Subsequent to the adoption of the new standard, the Company may recognize a gain on a real estate disposition that previously did not qualify as a sale or for full profit recognition due to the timing of the transfer of control.

Property and equipment

Property and equipment are carried at cost and are depreciated on a straight-line basis (after taking into account their respective estimated residual value) over 5 or 7 years, the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.

During the three months ended March 31, 2019 and 2018, the depreciation expense were $1,874 and $472, respectively.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board ("FASB") issued new leasing guidance ("Topic 842") that replaced the existing lease guidance ("Topic 840"). Topic 842 established a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and lease liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. This guidance also expanded the requirements for lessees to record leases embedded in other arrangements and the required quantitative and qualitative disclosures surrounding leases.

The Company adopted Topic 842 on its effective date of January 1, 2019 using a modified retrospective transition approach; as such, Topic 842 will not be applied to periods prior to adoption and the adoption had no impact on the Company's previously reported results. The Company elected the package of practical expedients permitted under the transition guidance within Topic 842, which allowed the Company to carry forward its identification of contracts that are or contain leases, its historical lease classification and its accounting for initial direct costs for existing leases. The impact of adopting Topic 842 was not material to the Company’s result of operations or cash flows for the three months ended March 31, 2019. The Company recognized operating lease liabilities of $178,365 upon adoption, with corresponding ROU assets on its balance sheet. See Note 47 for further details.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, (Topic 326), Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments which amends the current accounting guidance and requires the use of the new forward-looking “expected loss” model, rather than the “incurred loss” model, which requires all expected losses to be determined based on historical experience, current conditions and reasonable and supportable forecasts. This guidance amends the accounting for credit losses for most financial assets and certain other instruments including trade and other receivables, held-to-maturity debt securities, loans and other instruments. ASU 2016-13 is effective for public entities for annual periods beginning after December 15, 2019, and interim periods within those annual periods. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein. The Company is evaluating the impact of the adoption of ASU 2016-13 on its financial position and results of operations.

Note 3 - Income Taxes

The Company has not recognized an income tax benefit for its operating losses generated based on uncertainties concerning its ability to generate taxable income in future periods. The tax benefit for the period presented is offset by a valuation allowance established against deferred tax assets arising from the net operating losses, the realization of which could not be considered more likely than not. In future periods, tax benefits and related deferred tax assets will be recognized when management considers realization of such amounts to be more likely than not.

As of September 30,March 31, 2019 and 2018, and 2017, the Company has incurred a net loss of $250,035$68,419 and $282,981$47,776 which resulted in a net operating loss for income tax purposes. NOLs begin expiring in 2036. The loss results in a deferred tax assetassets of approximately $110,000$202,102 and $ 117,290$23,920 at the effective tax rate of 21% for the period ended September 30, 2018 and 34% for the period ended September 30, 2017, respectively.. The deferred tax asset has been off-set by an equal valuation allowance.

Note 54 - Concentration of Risk

The Company maintains cash in one account within one local commercial bank located in Southern California. The standard insurance amount is $250,000 per depositors under the FDIC’s general deposit insurance rules. At September 30,March 31, 2019 and December 31, 2018, uninsured cash balances in any domestic U.S. financial institution is $386,263.were $349,387 and $595,451, respectively. 

Note 65 - Related Party Transactions 

On February 1, 2017, the Company entered into a lease for office space (the “Office Lease”) with Glory Investment International Inc. (“Glory Investment”) whose CEO is an immediate family of the Company. Pursuant to the Office Lease, the Company subleased 200 square feet office from Glory Investment, and the monthly rent of $500 is due within first five business days of each month. The term of the Office Lease is renewable from year-to-year, and was terminated on March 31, 2018. We believe that the rent is at or below market for the space we are occupying. For the ninethree months ended and as of September 30,March 31, 2019 and 2018, and 2017, rent expense was $250$0 and $4,000.$250.

During the ninethree months ended on September 30, 2018 and 2017,March 31, 2019, Mr. Patrick Liang, the PresidentCompany’s CEO, paid operating expenses on behalf of the Company, loaned to the Company in the amount of $4,722$5,805. At March 31, 2019 and $0 respectively, which isDecember 31, 2018, the Company had balance of due on demandto Mr. Liang in the amount of $5,805 and bears no interest.$Nil, respectively.

Note 7 -Notes6 - Notes Receivable

On March 17, 2017, the Company entered into a Land Transaction Agreement with Steven Zhi Qin, a third party individual. Pursuant to the agreement, the Company sold the undeveloped land located in Desert Hot Spring with value of $283,333, to Steven Zhi Qin in exchange for a Promissory Note in the amount of $310,000. The Promissory Note is secured by a Deed of Trust to Chicago Title Company, a California corporation and an independent institution insuring the Company’s collection right, and was due on March 17, 2018, with interest at the rate of 2% per annum, payable in monthly installment of interest only, in the amount of $517. The Promissory Note also applies to Steven Zhi Qin’s personal property located at 1715 East Cortez Street, West Covina, CA 91791 as additional collateral, of which a lien will be recorded against said property. On March 6, 2018, the Company reached an agreement with Steven Zhi Qin, pursuant to which the Company agreed and approved the amendment of the Promissory Note to extend maturity date to March 17, 2019. Subsequently,On March 12, 2019, the Company received paymentreached another agreement with Steven Zhi Qin, pursuant to which the Company agreed and approved amendment of $100,000 and $100,000 on March 17 and Octoberthe Promissory Note to extend maturity date to June 30, 2018, respectively,2019, and the remaining $110,000 will be due on March 17,June 30, 2019.

For the ninethree months ended September 30,March 31, 2019 and 2018, and 2017, total interest income was $3,650$550 and $3,100,$1,550, respectively.

Note 87 - Commitments and Contingencies 

The Company follows ASC 450-20,Loss Contingencies, to report accounting for contingencies.  Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

Note 9 – Common Stock

On May 1, 2018, the Company was quoted on OTC Market with trading symbol FGNV. According to the Consulting Agreement with Speedlight Consulting Services Inc. dated on November 05, 2016, the Company issued 3,000,000 shares to Speedlight Consulting Services Inc. on May 9, 2018 to settle with the accrued consulting expenses.

In order to meet the new OTCQB standards regarding the public float which became effective on May 20, 2018, the Registrant’s CEO and principal shareholder returned 15,000,000 shares of the Registrant’s common stock (the “Shares”) to the Registrant on June 29, 2018. One of the new standards was that every company trading on the OTCQB that has a market value of less than $2 million must have a freely traded “Public Float” of at least 10% of the company’s total issued and outstanding common stock. The Registrant does not have a market value of $2 million and prior to the return of the shares, its public float was approximately 8%. After the return of the Shares, the Registrant’s public float increased to approximately 10.5%.

The 15,000,000 shares were delivered to the Registrant’s Transfer Agent with instructions to remove them from issued and outstanding status and add them to the authorized but not issued status. The above action was completed on June 29, 2018.

Note 10 - Subsequent EventLeases

The Company has evaluated subsequent events throughoperating lease for its leases office space from a third party. We determined if an arrangement is a lease inception of the date these financial statements were issuedcontract and determined that there were no subsequent eventswhether a contract is or transactions that require recognitioncontains a lease by determining whether it conveys the right to control the use of identified asset for a period of time. The contact provides us the right to substantially all the economic benefits from the use of the identified asset and the right to direct use of the identified asset, we consider it to be, or disclosurescontain, a lease.  

Leases is classified as operating at inception of the lease. Operating leases result in the financial statements.recognition of ROU assets and lease liabilities on the balance sheet. ROU assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term as of the commencement date. Because our leases do not provide an explicit or implicit rate of return, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments on an individual lease basis. Our incremental borrowing rate for a lease is the rate of interest we would have to pay on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar term, which is 5.5%. Lease expense for these leases is recognized on a straight-line basis over the lease term.