| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use
of Estimates We
prepare our financial statements in accordance with accounting principles generally accepted in the United States of America, which requires
management to use its judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities and related
disclosures at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. These
assumptions and estimates could have a material effect on our financial statements. Actual results may differ materially from those estimates.
We review our estimates on an ongoing basis based on information currently available, and changes in facts and circumstances may cause
us to revise these estimates. Significant accounting estimates reflected in the Company’s financial statements include allowance
for doubtful accounts, revenue recognition, deferred revenue, useful lives of property, plant and equipment and fair value of
lease liabilities and right of use assets, and inventory obsolescence. Cash Cash
consists of petty cash and checking accounts. For the purpose of the statements of cash flows, all highly liquid investments with an
original maturity of three months or less are considered cash equivalents. There were no The
Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts
Receivable We
manage credit risk associated with our accounts receivables at the customer level. Because the same customers typically generate the
revenues that are accounted for under both Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic
606) Accounting Standards Codification Topic 326, Credit Losses (Topic 326 Pursuant
to Topic 326 for our accounts receivables, we maintain an allowance for doubtful accounts that reflects our estimate of our expected
credit losses. Our allowance is estimated using a loss rate model based on delinquency. The estimated loss rate is based on our historical
experience with specific customers, our understanding of our current economic circumstances, reasonable and supportable forecasts, and
our own judgment as to the likelihood of ultimate payment based upon available data. We perform credit evaluations of customers and establish
credit limits based on reviews of our customers’ current credit information and payment histories. The actual rate of future credit
losses, however, may not be similar to past experience. Our estimate of doubtful accounts could change based on changing circumstances,
including changes in the economy or in the particular circumstances of individual customers. Accordingly, we may be required to increase
or decrease our allowance for doubtful accounts. Inventory All
inventory consists of raw materials and is valued at the lower of first-in-first-out cost or net realizable value; where net realizable
value is considered to be the estimated selling price in the ordinary course of business, less reasonably predictable cost of completion,
disposal, and transportation. Management periodically evaluates inventory for obsolescence and has determined that no inventory is obsolete as of November 30,
2022 and 2021. Property
and Equipment Property
and equipment are recorded at cost and depreciated using a straight-line method over the estimated useful lives. Ordinary repair
and maintenance costs are included in sales, general, and administrative (“SG&A”) expenses on our statements of operations.
However, expenditures for additions or improvements that significantly extend the useful life of the asset are capitalized in the period
incurred. At the time assets are sold or disposed of, the cost and accumulated depreciation are removed from their respective accounts
and the related gains or losses are reflected in the statements of operations in gains from sales of property and equipment, net. The
Company’s demonstration units are examples of two of the Company’s products and are taken to trade shows and other venues
to showcase the Company’s hydrogen cell technology and products. Construction in progress includes large equipment that will be
used in production that have not yet been placed in service because, either installation or training is not complete. We
periodically evaluate the appropriateness of remaining depreciable lives assigned to property and equipment. Leasehold improvements are
amortized using the straight-line method over their estimated useful lives or the remaining term of the lease, whichever is shorter.
Generally, we assign the following estimated useful lives to these categories: SCHEDULE
OF ESTIMATED USEFUL LIVES
Category Estimated
Useful Life
Machinery
and equipment Leasehold
improvements Demonstration
units 5 10 7
years 5
years Leases We
determine whether an arrangement is a lease at the inception of the arrangement based on the terms and conditions in the contract. A
contract contains a lease if there is an identified asset, and we have the right to control the asset for a period of time in exchange
for consideration. Lease arrangements can take several forms. Some arrangements are clearly within the scope of lease accounting, such
as real estate contracts that provide an explicit contractual right to use a building for a specified period of time in exchange for
consideration. However, the right to use an asset can also be conveyed through arrangements that are not leases in form, such as leases
embedded within service and supply contracts. We analyze all arrangements with potential embedded leases to determine if an identified
asset is present, if substantive substitution rights are present, and if the arrangement provides the customer control of the asset. Our
lease portfolio is substantially comprised of operating leases related to leases of real estate and improvements. From time to time,
we may also lease various types of small equipment and vehicles. Operating
lease right-of-use (“ROU”) assets represent our right to use an individual asset for the lease term and lease liabilities
represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at
the commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide the lessor’s
implicit rate we use the incremental borrowing rate IBR, in determining the present value of lease payments by utilizing a fully collateralized
rate for a fully amortizing loan with the same term as the lease. Lease
terms include options to extend the lease when it is reasonably certain those options will be exercised. For leases with terms greater
than 12 months, we record the related asset and obligation at the present value of lease payments over the term. Our leases can include
rental escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments when
such renewal options and/or termination options are reasonably certain of exercise. A
ROU asset is subject to the same impairment guidance as assets categorized as plant, property, and equipment. As such, any impairment
loss on ROU assets is presented in the same manner as an impairment loss recognized on other long-lived assets. A
lease modification is a change to the terms and conditions of a contract that change the scope or consideration of a lease. For example,
a change to the terms and conditions to the contract that adds or terminates the right to use one or more underlying assets, or extends
or shortens the contractual lease term, is a modification. Depending on facts and circumstances, a lease modification may be accounted
as either: (1) the original lease plus the lease of a separate asset(s) or (2) a modified lease. A lease will be remeasured if there
are changes to the lease contract that do not give rise to a separate lease. Impairment
of long-lived Assets U.S.
GGAP requires that long-lived assets held by the Company be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset group may not be recoverable. No Revenue
Recognition When
entering into contracts with our customers, we follow the five steps outlined in Accounting Standards Codification Topic 606, Revenue
from Contracts with Customers (Topic 606)
i. Identify
the contract with our customer.
ii. Identify
the performance obligations in the contract.
iii. Determine
the transaction price.
iv. Allocate
the transaction price to the performance obligations.
v. Evaluate
the satisfaction of the performance obligations. We
account for contracts, with our customers, when we have approval and commitment from both parties, the rights of the parties are identified,
payment terms are established, the contract has commercial substance and collectability of consideration is probable. Under
Topic 606, we recognize revenue when or as we satisfy a performance obligation by transferring a promised good or service to our customer.
A good or service is considered transferred when the customer obtains control. The standard defines control as an entity’s ability
to direct the use of, and obtain substantially all of the remaining benefits from, an asset. We recognize revenue once control has passed
to the customer. The following indicators are evaluated in determining when control has passed to the customer:
i. We
have a right to payment for the product or service,
ii. The
customer has legal title to the product,
iii. We
have transferred physical possession of the product to the customer,
iv. The
customer has the risk and rewards of ownership of the product, and
v. The
customer has accepted the product. The
following are the two revenue streams: Revenue
Recognition for Sale and/or Install of Power Systems. Most
of our contracts to date are to enhance assets
controlled by the customer. In these cases, revenue is recognized based on the percentage of completion method, as described below. Payment terms for these
contracts generally match the payment terms for assets not controlled by the customer. For
contracts where revenue is recognized over time, management uses the percentage of completion input method based on costs. Specifically, percentage of completion is the ratio of total costs to date to estimated expected costs
related to the project. Some contracts to date do not qualify
for revenue recognition over time because Management has determined that though the assets which the Company creates are customized to
the specifications required by the customer, the assets have alternative use because the Company could theoretically find a new purchaser
for the product with minimal modifications to the assets. Therefore, the Company has earned revenue for the sale and/or installation
of power systems both over time as the performance obligations is satisfied, and at the point in time in which the performance obligation
is satisfied. The
Company has not had experience with returns to date. Additionally, the customer is generally involved in the customization and selection
of specifications for the contracted goods and services. Therefore, management considers returns as they arise. The
Company provides explicit warranties on products, in that it provides assurance that the related product will function as the parties
intended. These warranties are not separately purchasable. Warranties do not constitute a separate performance obligation. Revenue
Recognition for the Design and Testing of Power Systems. Significant
Judgments Freight
Costs. Costs
to Obtain or Fulfill a Contract Disaggregated
Revenue SCHEDULE
OF DISAGGREGATION OF REVENUE
2022 2021
Sales of services $ 28,673 $ 15,000
Sales of products 3,439,914 355,341
Total sales $ 3,468,587 $ 370,341 Reconciliation
of Contract Balances 4,208,364
and $ 1,363,050 ,
respectively. Additionally, as of November 30,
2022 and 2021, the Company had $ 222,395
and $ 15 ,000,
respectively of contract assets included in accounts receivable for revenues earned, but not yet invoiced. The
following table provides a summary of the changes included in deferred revenue during the years ended November 30, 2022 and 2021: SUMMARY
OF CHANGES IN DEFERRED REVENUE
2022 2021
Beginning balance $ 1,007,709 $ -
Additions to contract liabilities 4,208,364 1,363,050
Deductions to contract liabilities (3,439,914 ) (355,341 )
Ending balance $ 1,776,159 $ 1,007,709 Remaining
Performance Obligations 5,200,000
in unsatisfied performance
obligations yet to be collected, which are expected to be fully satisfied within 1-2 years . Cost
of Revenue The
expenses that are included in costs of revenue include all raw material and in-house manufacturing costs for the products we manufacture. Advertising The
Company expenses marketing and advertising costs as incurred. During the year ended November 30, 2022 and 2021, the Company spent $ 71,724 167,020 Settlement During
the year ended November 30, 2022, the Company issued preferred stock and recognized a settlement expense of $ 983,500
to one of the Company founders as part
of a settlement agreement with a third-party. In connection with the legal settlement, the Company also recognized a gain of $ 20,450
related to a previous sublease arrangement. Concentration
of Credit and Business Risk The
Company maintains its cash accounts at a commercial bank located in United States. The FDIC insures $ 250,000 1,010,000 115,000 For
the year ended November 30, 2022, two vendors accounted for 29 15 For the years ended November 30, 2022 and
2021, two customers accounted for 99.3 96 Two customers represented 100 100 Stock-Based
Compensation The
Company accounts for stock grants that are issued to non-employees based on the estimated fair value of goods or services provided to
the Company. Income
Taxes We
account for our income taxes in accordance with Income Taxes Topic of the FASB ASC 740, which requires recognition of deferred tax assets
and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and tax credit carry forwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that
includes the enactment date. Income
tax expense is based on reported earnings before income taxes. Deferred income taxes reflect the impact of temporary differences between
assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes and are measured by applying
enacted tax rates in effect in years in which the differences are expected to reverse. We
also follow the guidance related to accounting for income tax uncertainties. In accounting for uncertainty in income taxes, the Company
recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely
than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized
in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement
with the relevant tax authority. Our
income is subject to taxation in the United States. Significant judgment is required in evaluating the Company’s tax positions
and determining its provision for income taxes. The Company establishes reserves for income tax-related uncertainties based on estimates
of whether, and the extent to which, additional taxes will be due. These reserves for tax contingencies are established when we believe
positions do not meet the more-likely-than-not recognition threshold. We adjust uncertain tax liabilities in light of changing facts
and circumstances, such as the outcome of a tax audit or lapse of a statute of limitations. The provision for income taxes includes the
impact of uncertain tax liabilities and changes in liabilities that are considered appropriate. Currently,
2019, 2020, and 2021 tax years are open and subject to examination by the taxing authorities. However, the Company is not currently under
audit nor has the Company been contacted by any of the taxing authorities. Recent
Accounting Standards In
February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02
– Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities
on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective December 1, 2022, for the Company,
with early implementation allowed. The Company elected to adopt ASU 2016-02 effective December 1, 2020. The adoption of ASU 2016-02 required
the Company to record lease assets and liabilities on the balance sheet and also disclose key information about the Company’s leasing
arrangement. In
August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06,
Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s
Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates
the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies
the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard
also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s
own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for
all convertible instruments. ASU 2020-06 is effective January 1, 2022, and should be applied on a full or modified retrospective basis,
with early adoption permitted beginning on January 1, 2021. The Company adopted ASU 2020-06 effective December 31, 2021, applied on the
full retrospective basis. The adoption of ASU 2020-06 did not have an impact on the Company’s financial statements. The
Company has reviewed all other recently issued, but not yet adopted, accounting standards in order to determine effects, if any
on its results of operations, financial position or cash flows. Based on that review, the Company believes that none of these pronouncements
will have a significant effect on its financial statements. |
