| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of Consolidation The
consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Intellitronix Corp. and Cortes
Campers, LLC. All intercompany transactions and balances have been eliminated in consolidation. On
January 11, 2021, the Company created a new subsidiary called Cortes Campers, LLC, domiciled in Wyoming. Cortes Campers, LLC was created
to market tow behind travel trailers for the recreational vehicle market and. The division was in the early stage of revenue generation
as of the date of this report. Cortes Campers, LLC is 99% owned by the Company and 1% owned by Paul Spivak, the Company’s former
CEO. US
Lighting Group, Inc created a new subsidiary called Fusion X Marine, LLC on April 12, 2021, domiciled in Wyoming, to sell boats and other
related products to the recreational marine market. Fusion X Marine is 99% owned by the Company and 1% owned by Paul Spivak, the Company’s
former CEO. The subsidiary has had no sales as of the date of this report. Use
of Estimates The
preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the U.S requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the financial statement date, and reported amounts of revenue and expenses during the reporting period. Significant
estimates are used in valuing our allowances for doubtful accounts, reserves for inventory obsolescence, valuing derivative liabilities,
valuing equity instruments issued for services, and valuation allowance for deferred tax assets, among others. Actual results could differ
from these estimates. Segment
Reporting The
Company operates in one segment for the manufacture and distribution of our products. In accordance with the “Segment Reporting”
Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President,
who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing
guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information
quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the
entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting”
due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing
and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting”
can be found in the accompanying consolidated financial statements. Loss
per Share Calculations Basic
earnings per share are computed by dividing net income (loss) available to common shareholders by the weighted-average number of common
shares available. Diluted earnings per share is computed by dividing the net income applicable to common shareholders by the weighted
average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive
potential common shares had been issued using the treasury stock method. Potential common shares are excluded from the computation when
their effect is antidilutive. The dilutive effect of potentially dilutive securities is reflected in diluted net income per share if
the exercise prices were lower than the average fair market value of common shares during the reporting period. Warrants
to acquire 20,000 shares of common stock, and 226,356 shares of common stock issuable under convertible note agreements, have been excluded
from the calculation of weighted average common shares outstanding at September 30, 2021, as their effect would have been anti-dilutive.
Warrants to acquire 4,104,000 shares of common stock have been excluded from the calculation of weighted average common shares outstanding
at September 30, 2020, as their effect would have been anti-dilutive. Revenue
Recognition The
Company recognizes revenue in accordance with Accounting Standard Update (“ASU”) No. 2014-09. This standard provides authoritative
guidance clarifying the principles for recognizing revenue and developing a common revenue standard for U.S. generally accepted accounting
principles. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods and
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in the exchange for those
goods or services. Under
this guidance, revenue is recognized when control of promised goods or services is transferred to the Company’s customers, in an
amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company reviews
its sales transactions to identify contractual rights, performance obligations, and transaction prices, including the allocation of prices
to separate performance obligations, if applicable. Revenue and costs of sales are recognized once products are delivered to the customer’s
control and performance obligations are satisfied. Cash
and Cash Equivalents Cash
and cash equivalents include all highly liquid investments with remaining maturities of three months or less at the date of purchase. Accounts
Receivable The
Company evaluates the collectability of its trade accounts receivable based on a number of factors. In circumstances where the Company
becomes aware of a specific customer’s inability to meet its financial obligations to the Company, a specific reserve for bad debts
is estimated and recorded, which reduces the recognized receivable to the estimated amount the Company believes will ultimately be collected.
In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on the Company’s historical
losses and an overall assessment of past due trade accounts receivable outstanding. The
allowance for doubtful accounts and returns is established through a provision reducing the carrying value of receivables. At September
30, 2021 and December 31, 2020, the Company determined that no allowance for doubtful accounts was necessary. Inventories Inventories
are stated at the lower of cost or net realizable value. Cost is computed on a first-in, first-out basis. The Company’s inventories
as of September 30, 2021 and December 31, 2020 are included in discontinued operations. The
Company provides inventory reserves based on excess and obsolete inventories determined primarily by future demand forecasts. The write
down amount is measured as the difference between the cost of the inventory and market based upon assumptions about future demand and
charged to the provision for inventory, which is a component of cost of sales. At the point of the loss recognition, a new, lower cost
basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase
in that newly established cost basis. At September 30, 2021 and December 31, 2020, the Company determined that no reserve for excess
and obsolete inventory was necessary. Property
and Equipment Property
and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is calculated using the straight-line
method over the estimated useful lives of the assets. The Company has determined the estimated useful lives of its property and equipment,
as follows:
Building 40 years
Building
and land improvements 7-15 years
Vehicles 5 years
Production
equipment 5 years
Office
equipment 3 years
Furniture
and fixtures 7 years Maintenance
and repairs are charged to expense as incurred. The cost and accumulated depreciation of assets sold or otherwise disposed of are removed
from the related accounts and the resulting gain or loss is reflected in the statements of operations. Management
assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may
not be recoverable. If there is an indication of impairment, management prepares an estimate of future cash flows expected to result
from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment
loss is recognized to write down the asset to its estimated fair value. The Company did not record an impairment loss for the nine months
ended September 30, 2021 and 2020. Product
Development Costs Product
development costs are expensed in the period incurred. The costs primarily consist of prototype and testing costs. Product development
costs for the nine months ended September 30, 2021 and 2020, were $41,000 and $119,000, respectively. Shipping
and Handling Costs The
Company’s shipping and handling costs relating to inbound and outbound freight are reported as cost of goods sold in the consolidated
Statements of Operations. The Company classifies amounts billed to customers for shipping fees as revenues. Income
Taxes Income
tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences
of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are recorded
to reduce deferred tax assets to the amount that will more likely than not be realized. The Company has recorded a valuation allowance
against its deferred tax assets as of September 30, 2021 and December 31, 2020. The
Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The
first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more
likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any.
The second step is to measure the tax benefit as the largest amount that is more than 50 percent likely of being realized upon settlement.
The Company classifies the liability for unrecognized tax benefits as current to the extent that the Company anticipates payment (or
receipt) of cash within one year. Interest and penalties related to uncertain tax positions are recognized in the provision for income
taxes. Advertising
Costs Advertising
costs are expensed as incurred and are included in selling, general and administrative expenses. Advertising costs from continuing operations
were $11,000 and $0 for the nine months ended September 30, 2021 and 2020, respectively. Concentrations The
Company maintains the majority of its cash balances with one financial institution, in the form of demand deposits. Periodically, the
Company had cash deposits that exceeded the federally insured limit of $250,000. The Company believes that no significant concentration
of credit risk exists with respect to these cash balances because of its assessment of the creditworthiness and financial viability of
the financial institution. Fair
Value Measurements The
Company determines the fair value of its assets and liabilities based on the exchange price in U.S. dollars that would be received for
an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the
use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy with three levels of inputs,
of which the first two are considered observable and the last unobservable, to measure fair value:
● Level
1 — Quoted prices in active markets for identical assets or liabilities.
● Level
2 — Inputs, other than Level 1, that are observable, either directly or indirectly, such as quoted prices for similar assets
or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or liabilities.
● Level
3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the
assets or liabilities. The
carrying amounts of financial instruments such as cash, accounts receivable, inventories, accounts payable and accrued liabilities, accrued
payroll liabilities, and advanced customer deposits, approximate the related fair values due to the short-term maturities of these instruments.
The carrying values of the line of credit and notes payable approximate their fair values due to the fact that the interest rates on
these obligations are based on prevailing market interest rates. Recently
Accounting Pronouncements In
June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires entities to use a
forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial
instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 is effective
for the Company beginning January 1, 2023, and early adoption is permitted. The Company does not believe the potential impact of the
new guidance and related codification improvements will be material to its financial position, results of operations and cash flows. Other
recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants,
and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s
present or future financial statements. |
