UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1-SA
SEM-ANNUAL REPORT PURSUANT TO REGULATION A
For the Annual Period Ended June 30, 2024
FLOWER TURBINES, INC.
(Exact name of registrant as specified in its charter)
Commission File Number: 024-11330
Delaware
(State or other jurisdiction of
incorporation or organization)
240 Central Ave., IJ
Lawrence , NY. 11559
(Address of principal executive office)
(806) 318-1116
(Registrant’s telephone number, including area code)
46-3784856
(I.R.S. Employer Identification No.)
In this Special Financial Report, the term “Flower Turbines, Inc.,” “we,” or “the company” refers to Flower Turbines, Inc.
This report may contain forward-looking statements and information relating to, among other things, our its business plan and strategy, and its industry. These forward-looking statements are based on the beliefs of, assumptions made by, and information currently available to our management. When used in this report, the words “estimate,” “project,” “believe,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements, which constitute forward looking statements. These statements reflect management’s current views with respect to future events and are subject to risks and uncertainties that could cause the company’s actual results to differ materially from those contained in the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The company does not undertake any obligation to revise or update these forward-looking statements to reflect events or circumstances after such date or to reflect the occurrence of unanticipated events.
ITEM 1. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations for the six-month period ended June 30, 2023 (the “2024 Interim Period”), and the six-month period ended June 30, 2024 (the “2023 Interim Period”) should be read in conjunction with our unaudited consolidated financial statements and the related notes included in this report.
Overview
Our predecessor-in-interest, Flower Turbines, LLC, was formed as a New York limited liability company on September 15, 2013, and converted into Flower Turbines, Inc., a Delaware corporation, on December 27, 2019. Our headquarters are in Lawrence, New York. We develop and manufacture wind turbines.
On March 27, 2019, we formed Flower Turbines B.V., a Netherlands company, to sell, install, and develop sustainable energy solutions in the European Union. In January 2020, we extended our business into the electric mobility vertical through Flower Turbines B.V.’s acquisition of a product line of charging stations, which include stationary poles, outdoor benches, and workstations, which can charge electric vehicles and other products such as mobile phones. The charging stations generate power through wind, solar, and grid energy. We outfit these charging stations with our wind turbines.
Results of Operation
The following summarizes the results of our operations for the 2024 Interim Period as compared to the 2023 Interim Period:
Six Month Ended | ||||||||||||
June 30, | ||||||||||||
2024 | 2023 | $ Change | ||||||||||
Net revenues | $ | 39,950 | $ | 263,109 | $ | (223,159 | ) | |||||
Cost of net revenues | $ | (130,420 | ) | $ | (62,270 | ) | $ | (68,150 | ) | |||
Gross profit/(loss) | $ | (90,470 | ) | $ | 200,839 | $ | (291,309 | ) | ||||
Total Operating Expenses | $ | 1,435,553 | $ | 1,526,470 | $ | (90,917 | ) | |||||
Loss from operations | $ | (1,526,023 | ) | $ | (1,325,631 | ) | $ | (200,392 | ) | |||
Total Other Income/(Expense) | $ | 9,149 | $ | (2,884 | ) | $ | 12,033 | |||||
Net loss | $ | (1,535,172 | ) | $ | (1,322,747 | ) | $ | (212,425 | ) | |||
Foreign currency translation gain/loss | $ | 44,734 | $ | (6,879 | ) | $ | 51,613 | |||||
Other comprehensive loss | $ | (1,490,438 | ) | $ | (1,329,626 | ) | $ | (160,812 | ) |
For the 2024 Interim Period, we had revenues of $39,950, compared to $263,109, net revenues of for the 2023 Interim Period. While revenue decreased during the 2024 Interim Period, our costs of goods sold increase from to $62,270 for the 2023 Interim Period to $130,420 for the 2024 Interim Period. For the 2024 Interim Period, we had a gross profit of -$90,470, compared to a gross loss of $200,839 for the 2023 Interim Period. The significant decrease in revenue and increase in costs of goods sold during the 2024 Interim Period is primarily as a result of personnel changes, supply chain issues, and our change in focus from small customers to larger customers.
For the 2023 Interim Period, our operating expenses were $1,526,470, consisting of $173,658 for sales and marketing expenses, $87,089 for research and development, and $1,265,723 for general and administrative costs. For the 2024 Interim Period, our operating expenses were $1,435,553, consisting of $211,133 for sales and marketing expenses, $63,940 for research and development, and $1,160,480 for general and administrative costs.
For the 2024 Interim Period, we had an operating loss of $1,435,553, compared to an operating loss of $1,325,631 for the 2023 Interim Period.
For the 2023 Interim Period, we had total other income and expenses of -2,884, consisting of $1,758 in interest expense, -$1,565 in interest income, and -$3,077. For the 2024 Interim Period, we had total other income and expenses of $9,149, consisting of $11,437 in interest expense, -$335 of intrest income, and -$1,953 in other expenses.
For the 2024 Interim Period, we had a net loss of $1,535,172, compared to a net loss of $1,329,626 for the 2023 Interim Period.
Liquidity and Capital Resources
As of June 30, 2024, we had total current assets in the amount of $1,838,303, consisting of $504,323 in cash, $303,578 in accounts receivables, $21,362 in prepaid expenses, $650,992 in inventory, $259,536 in loan receivables, $7,000 in related party loan receivables and $91,512 of funds held in escrow for our crowdfunding campaign. As of December 31, 2023, we had total current assets in the amount of $1,318,264 consisting of $9,025 in cash, $300,547 in accounts receivables, $27,201 in prepaid expenses, $594,206 in inventory, $93,837 in other assets and $293,447 of funds held in escrow for our crowdfunding campaign.
As of June 30, 2024, and excluding any future proceeds raised in our current Regulation A+ offering, we had sufficient operating capital to fund our operations through October 2024.
We will incur significant additional costs in commercializing our products, including, but not limited to, in production, marketing, sales and customer service, and intend to continue to fund our operations through funds received from this Offering. We may also engage in additional debt and/or equity financings as determined to be necessary. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned development, which could harm our business, financial condition and operating results. Accordingly, our independent auditors report includes a paragraph regarding substantial doubt about our ability to continue as a going concern
Debt
In November 2019, Flower Turbines B.V., our subsidiary, entered into an unsecured loan agreement with Rabobank, pursuant to which two installments were advanced having in the aggregate principal amount of $56,135, and which matures in 84 months. This first advance was in the amount of $28,068, bears interest at 7.5% per annum, and requires monthly interest payments for 84 months with a final balloon payment on the maturity date. The second advance was in the amount of $28,067, bears interest at 7.5% per annum, requires interest only payments for the first 24 months, principal and interest payments of $468 for the next 60 months, with a final balloon payment on maturity date. The total unpaid principal balances on the loans were $55,934 as of December 31, 2022.
Plan of Operations
We are investing in the continued growth of our brand and are seeking to hit the following milestones during 2024:
· | Finalize and launch the full range of turbine sizes manufactured and sold in the U.S. market. | |
· | EU$500,000 in revenue from sales by Flower Turbines B.V., in the European Union. | |
· | Commence creating U.S. prototypes of our flat and slanted roof wind/solar installation products with no bolts required (patents granted and pending) and our Power Tower. Additionally, we need to conduct testing and obtain the necessary certification(s) to prepare the products for market introduction. |
The extent to which we will be able to complete the milestones outlined above is dependent upon the success of our marketing efforts and our utilization of cash.
Impact of COVID-19
We have been materially and adversely affected by the COVID-19 outbreak. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report, and we are monitoring the global situation and its effects on our business, financial condition, liquidity, and operations. To date, the pandemic has resulted in delays in the shipment to us of certain components, which has delayed the delivery of units to customers . . If there is a resurgence of the pandemic, it may have a material adverse effect on our results of future operations, financial position, and liquidity.
ITEM 2. OTHER INFORMATION
Nothing to disclose.
ITEM 3. FINANCIAL STATEMENTS
The accompanying semiannual financial statements are unaudited and have been prepared in accordance with the instructions to Form 1-SA. Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders’ equity in conformity with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included, and all such adjustments are of a normal recurring nature. Operating results for the six months ended June 30, 2023 are not necessarily indicative of the results that can be expected for the year ending December 31, 2024.
ITEM 4. EXHIBITS
EXHIBITS
1. | Filed as an exhibit to the Flower Turbines, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11330) and incorporated herein by reference. Available at, https://www.sec.gov/Archives/edgar/data/1739997/000110465923007524/tm2229852d2_ex2-1.htm. | |
2. | Filed as an exhibit to the Flower Turbines, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11330) and incorporated herein by reference. Available at, https://www.sec.gov/Archives/edgar/data/1739997/000110465923007524/tm2229852d2_ex2-2.htm. | |
3. | Filed as an exhibit to the Flower Turbines, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11330) and incorporated herein by reference. Available at, https://www.sec.gov/Archives/edgar/data/1739997/000110465923007524/tm2229852d2_ex2-3.htm. | |
4. | Filed as an exhibit to the Flower Turbines, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11330) and incorporated herein by reference. Available at, https://www.sec.gov/Archives/edgar/data/1739997/000110465923007524/tm2229852d2_ex6-1.htm. | |
5. | Filed as an exhibit to the Flower Turbines, Inc. Regulation A Offering Statement on Form 1-A Commission File No. 024-11330) and incorporated herein by reference. Available at, https://www.sec.gov/Archives/edgar/data/1739997/000110465923007524/tm2229852d2_ex6-2.htm. | |
6. | Filed as an exhibit to the Flower Turbines, Inc. Regulation A Offering Statement on Form 1-A Commission File No. 024-11330) and incorporated herein by reference. Available at, https://www.sec.gov/Archives/edgar/data/1739997/000110465923007524/tm2229852d2_ex6-3.htm. | |
7. | Filed as an exhibit to the Flower Turbines, Inc. Regulation A Offering Statement on Form 1-A Commission File No. 024-11330) and incorporated herein by reference. Available at, https://www.sec.gov/Archives/edgar/data/1739997/000110465923007524/tm2229852d2_ex6-4.htm. | |
8. | Filed as an exhibit to the Flower Turbines, Inc. Regulation A Offering Statement on Form 1-A Commission File No. 024-11330) and incorporated herein by reference. Available at, https://www.sec.gov/Archives/edgar/data/1739997/000110465923007524/tm2229852d2_ex6-5.htm. |
SIGNATURES
Pursuant to the requirements of Regulation A, the issuer has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Lawrence , New York, on September 19, 2024.
FLOWER TURBINES, INC.
By | /s/ Mark Daniel Farb | ||
Title: | Chief Executive Officer, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer and Director | ||
Dated: | September 19, 2024 |
Flower Turbines, Inc.
A Delaware Corporation
Consolidated Financial Statements
Unaudited
June 30, 2024
Flower Turbines, Inc.
TABLE OF CONTENTS
FLOWER TURBINES, INC.
June 30, 2024 (unaudited)
June 30, | December 31, | |||||||
2024 | 2023 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 504,323 | $ | 9,025 | ||||
Accounts receivable | 303,578 | 300,547 | ||||||
Prepaid expenses | 21,362 | 27,201 | ||||||
Inventory | 650,992 | 594,206 | ||||||
Other assets | 259,536 | 93,837 | ||||||
Loan receivable, related party | 7,000 | - | ||||||
Funds held in escrow | 91,512 | 293,447 | ||||||
Total Current Assets | 1,838,303 | 1,318,264 | ||||||
Non-Current Assets: | ||||||||
Right of use asset | 25,728 | 44,130 | ||||||
Property and equipment, net | 202,828 | 236,012 | ||||||
Total Non-Current Assets | 228,556 | 280,142 | ||||||
TOTAL ASSETS | $ | 2,066,859 | $ | 1,598,405 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Liabilities: | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 23,349 | $ | 119,151 | ||||
Deferred revenue | - | 191,929 | ||||||
Accrued expenses | 271,524 | 215,777 | ||||||
Loan payable, related party | - | 77,801 | ||||||
Right of use liability- current | 26,220 | 38,178 | ||||||
Notes payable - current | - | 4,269 | ||||||
Total Current Liabilities | 321,093 | 647,105 | ||||||
Long-Term Liabilities: | ||||||||
Right of use liability- net of current | - | 6,686 | ||||||
Loan payable | 112,499 | 115,663 | ||||||
Notes payable - net of current | 39,325 | 39,048 | ||||||
Total Long-Term Liabilities | 151,824 | 161,396 | ||||||
Total Liabilities | 472,917 | 808,502 | ||||||
Stockholders' Equity: | ||||||||
Common stock, $0.0001 par, 20,000,000 shares authorized, 10,477,722 and 10,250,354 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively | 1,048 | 1,025 | ||||||
Additional paid-in capital | 15,864,881 | 13,570,427 | ||||||
Accumulated deficit | (14,155,190 | ) | (12,620,018 | ) | ||||
Accumulated other comprehensive gain/(loss) | (116,797 | ) | (161,531 | ) | ||||
Total Stockholders' Equity | 1,593,942 | 789,904 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 2,066,859 | $ | 1,598,405 |
See accompanying notes, which are an integral part of these consolidated financial statements.
1
FLOWER TURBINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)
For the six months ended June 30, 2024 and 2023 (unaudited)
Six Month Ended | ||||||||
June 30, | ||||||||
2024 | 2023 | |||||||
Net revenues | $ | 39,950 | $ | 263,109 | ||||
Cost of net revenues | (130,420 | ) | (62,270 | ) | ||||
Gross profit/(loss) | (90,470 | ) | 200,839 | |||||
Operating Expenses: | ||||||||
General & administrative | 1,160,480 | 1,265,723 | ||||||
Sales & marketing | 211,133 | 173,658 | ||||||
Research and development | 63,940 | 87,089 | ||||||
Total Operating Expenses | 1,435,553 | 1,526,470 | ||||||
Loss from operations | (1,526,023 | ) | (1,325,631 | ) | ||||
Other Income/(Expense): | ||||||||
Interest expense | 11,437 | 1,758 | ||||||
Interest income | (335 | ) | (1,565 | ) | ||||
Other income/(expense) | (1,953 | ) | - | |||||
Investment loss | - | (3,077 | ) | |||||
Total Other Income/(Expense) | 9,149 | (2,884 | ) | |||||
Provision for income taxes | - | - | ||||||
Net loss | (1,535,172 | ) | (1,322,747 | ) | ||||
Foreign currency translation gain (loss) | 44,734 | (6,879 | ) | |||||
Other comprehensive loss | $ | (1,490,438 | ) | $ | (1,329,626 | ) | ||
Basic and diluted net loss per share | $ | (0.15 | ) | $ | (0.13 | ) | ||
Weighted average shares outstanding - basic and diluted | 10,048,533 | 10,233,393 |
See accompanying notes, which are an integral part of these consolidated financial statements.
2
FLOWER TURBINES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Common Stock | ||||||||||||||||||||||||
Number of Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Gain/(Loss) | Total Stockholders' Equity | |||||||||||||||||||
Balance at December 31, 2022 | 9,975,566 | $ | 998 | $ | 10,395,467 | $ | (9,222,540 | ) | $ | (49,704 | ) | $ | 1,124,221 | |||||||||||
- | ||||||||||||||||||||||||
Issuance of stock - Regulation A | 145,934 | 15 | 2,107,311 | - | - | 2,253,260 | ||||||||||||||||||
Net loss | - | - | - | (1,318,578 | ) | (6,879 | ) | (1,325,457 | ) | |||||||||||||||
Balance at June 30, 2023 | 10,121,500 | $ | 1,013 | $ | 12,502,778 | $ | (10,541,118 | ) | $ | (56,583 | ) | $ | 2,052,024 | |||||||||||
Balance at December 31, 2023 | 10,250,354 | 1,025 | 13,570,427 | (12,620,018 | ) | (161,531 | ) | 789,903 | ||||||||||||||||
Issuance of stock - Regulation A | 227,368 | 23 | 2,294,453 | - | - | 2,294,476 | ||||||||||||||||||
Net gain (loss) | - | - | - | (1,535,172 | ) | 44,734 | (1,490,438 | ) | ||||||||||||||||
Balance at June 30, 2024 | 10,477,722 | $ | 1,048 | $ | 15,864,881 | $ | (14,155,190 | ) | $ | (116,797 | ) | $ | 1,593,942 |
See accompanying notes, which are an integral part of these consolidated financial statements.
3
FLOWER TURBINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
As of June 30, 2024 and 2023 and for the period ended (unaudited)
Six Month Ended | ||||||||
June 30, | ||||||||
Cash Flows From Operating Activities | 2024 | 2023 | ||||||
Net loss | $ | (1,535,172 | ) | $ | (1,322,747 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 34,768 | 11,970 | ||||||
Non-cash lease expense | (242 | ) | (1,800 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
(Increase)/Decrease in prepaid expenses | 5,839 | (64,317 | ) | |||||
(Increase)/Decrease in other assets | (165,699 | ) | (240,901 | ) | ||||
(Increase)/Decrease in Funds held in escrow | 201,935 | - | ||||||
(Increase)/Decrease in inventory | (56,786 | ) | 269,214 | |||||
(Increase)/Decrease in accounts receivable | (3,031 | ) | (164,666 | ) | ||||
Increase/(Decrease) in accounts payable | (95,802 | ) | 8,073 | |||||
Increase/(Decrease) in accrued expenses | 55,747 | 59,050 | ||||||
Increase/(Decrease) in deferred revenue | (191,929 | ) | (239,864 | ) | ||||
Net Cash Used In Operating Activities | (1,750,372 | ) | (1,685,988 | ) | ||||
Cash Flows From Investing Activities | ||||||||
Sale of investments | - | 487,226 | ||||||
Purchase of intangible assets | - | (186,484 | ) | |||||
Purchase of property of equipment | (1,584 | ) | (20,243 | ) | ||||
Net Cash Provided by (Used In) Investing Activities | (1,584 | ) | 280,499 | |||||
Cash Flows From Financing Activities | ||||||||
Proceeds from/(payments to) notes payable | (7,156 | ) | 746 | |||||
Offering costs | - | (14,615 | ) | |||||
Proceeds, net of repayments of loan payable, related party | (84,801 | ) | - | |||||
Proceeds from issuance of stock | 2,294,477 | 1,375,696 | ||||||
Net Cash Provided By Financing Activities | 2,202,520 | 1,361,827 | ||||||
Cash effects of foreign currency translation loss | 44,734 | (6,879 | ) | |||||
Net Change In Cash | 495,298 | (50,541 | ) | |||||
Cash at Beginning of Period | 9,025 | 252,441 | ||||||
Cash at End of Period | $ | 504,323 | $ | 201,900 | ||||
Supplemental Disclosure of Cash Flow Information | ||||||||
Cash paid for interest | $ | (11,437 | ) | $ | (2,451 | ) | ||
Cash paid for income taxes | $ | - | $ | - | ||||
Supplemental Disclosure of Non-Cash Investing Activities: | ||||||||
Property and equipment purchased with loan | - | - |
See accompanying notes, which are an integral part of these consolidated financial statements.
4
FLOWER TURBINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2024 and 2023 and for the period ended (unaudited)
NOTE 1: NATURE OF OPERATIONS
Flower Turbines, Inc. and subsidiary (collectively the “Company”), is a corporation formed under the laws of Delaware. The Company was originally incorporated as a New York limited liability company on September 25, 2013 under the name Flower Turbines, LLC. The LLC converted to a Delaware corporation on December 26, 2019. The Company develops unique designs for wind turbines. On March 27, 2019 Flower Turbines B.V. (the “Subsidiary”) was formed in the Netherlands. Flower Turbines B.V. was a 96% owned subsidiary of the Company and was formed for the sale, installation, and development of sustainable energy solutions inside Europe. During 2022, the Company purchased the remaining 4% interest in the subsidiary and the Company is now the sole owner.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Basis for Consolidation
The Company prepares consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (GAAP). These consolidated financial statements include all accounts of Flower Turbines, Inc., along with its wholly owned subsidiary, Flower Turbines B.V. All transactions and balances between and among the aforementioned companies have been eliminated in consolidating the accounts for consolidated financial statement presentation. The accounting and reporting policies of the Company conform to GAAP. The Company adopted the calendar year as its basis of reporting.
Basis of Presentation
The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (GAAP). The Company has adopted the calendar year as its basis of reporting.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Noncontrolling Interests
Noncontrolling interests represents minority owners’ share of net income or losses and equity in the Company’s majority-owned consolidated subsidiary. During 2019, the Company owned 88% of the subsidiary, in 2020, the Company acquired an additional 8% of the subsidiary, and in June 2022 acquired an additional 4% of the subsidiary, at which time it became a wholly owned subsidiary of the Company. The financial statements have been retrospectively adjusted to reflect the change, and that there was no impact on net loss for the period ended June 30, 2024.
Cash Equivalents
For the purpose of the statement of cash flows, cash equivalents include time deposits, certificate of deposits, and all highly liquid debt instruments with original maturities of three months or less.
5
FLOWER TURBINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2024 and 2023 and for the period ended (unaudited)
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are carried at their estimated collectible amounts. Accounts receivable are periodically evaluated for collectability based on past credit history with clients and other factors. Provisions for losses on accounts receivable are determined on the basis of loss experience, known and inherent risk in the account balance, and current economic conditions. As of June 30, 2024 and December 31, 2023, the Company carried receivables of $303,578 and $300,547 and NIL allowances against such, all respectively.
Inventory & Shipping and Handling Costs
Inventory is stated at the lower of cost or market and accounted for using the specific identification method.
Property and Equipment
The Company has a policy to capitalize expenditures with useful lives in excess of one year and costs exceeding $1,000 as property and equipment and depreciates such assets on a straight-line basis over estimated useful lives (5 years). The Company’s property and equipment is assessed annually for indications of impairment. The Company’s property and equipment are recorded at costs of $202,828 and $236,012 and are presented net of accumulated depreciation of $122,716 and $90,848 as of June 30, 2024 and December 31,2023, respectively. Depreciation expense of $34,768 and $61,519 were recorded for the six months ended June 30,2024 and 2023, respectively.
Deferred Offering Costs
The Company complies with the requirement of FASB ASC 340-10-S99-1. Prior to the completion of the offering these costs are capitalized as deferred offering costs on the balance sheet. The deferred offering costs are charged to stockholders’ equity upon the completion of the offering. There were no deferred offerings costs capitalized to the balance sheet as of June 30,2024 and December 31, 2023, respectively.
Fair Value of Financial Instruments
Financial Accounting Standards Board (“FASB”) guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities.
6
FLOWER TURBINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2024 and 2023 and for the period ended (unaudited)
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active).
Level 3 - Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.
The carrying amounts reported in the balance sheets approximate their fair value.
Concentrations of Credit Risk
The Company’s financial instruments that are exposed to concentrations of credit risk consist of its cash. The Company will place its cash and cash equivalents with financial institutions of high credit- worthiness and has a policy to not carry a balance in excess of FDIC insurance limits.
Basic Income/(Loss) per Common Share
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net loss available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity.
Revenue Recognition
ASC Topic 606, “Revenue from Contracts with Customers” establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers.
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: 1) identify the contract with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to performance obligations in the contract; and 5) recognize revenue as the performance obligation is satisfied.
Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. As a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less.
7
FLOWER TURBINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2024 and 2023 and for the period ended (unaudited)
Each product sold to a customer typically represents a distinct performance obligation. The Company satisfies its performance obligation and revenue is recorded at the point in time when products are installed as the Company has determined that this is the point that control transfers to the customer. The Company invoices customers upon delivery of the products, and payments from such customers are due upon invoicing.
As of June 30, 2024 and December 31, 2023, NIL deferred revenue were recorded, respectively. Revenues are recognized on these arrangements after the units are produced and fulfilled to the customers, and all other revenue recognition criteria are achieved. Substantially, all revenue recorded for the six months ended June 30, 2024 and 2023 were for sales through the subsidiary.
Research and Development
The Company expenses research and development costs when incurred.
Advertising Costs
The Company’s policy regarding advertising is to expense advertising when incurred.
Income Taxes
The Company uses the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes. Under the liability method, deferred taxes are determined based on the temporary differences between the consolidated financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is unlikely that the deferred tax assets will be realized.
The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon its evaluation of the facts, circumstances and information available at the reporting date. In accordance with ASC 740-10, for those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, our policy is to record the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit will be recognized in the consolidated financial statements. The Company has determined that there are no material uncertain tax positions.
The Company accounts for income taxes with the recognition of estimated income taxes payable or refundable on income tax returns for the current period and for the estimated future tax effect attributable to temporary differences and carryforwards. Measurement of deferred income items is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized in the immediate future.
Foreign Currency
The consolidated financial statements are presented in United States Dollars, (“USD”), which is the reporting currency and the functional currency of the Company’s U.S. operations. The functional currency for the Subsidiary is its local currency. In accordance with ASC 830, Foreign Currency Matters, foreign denominated monetary assets and liabilities are translated to their USD equivalents using foreign exchange rates which prevailed at the balance sheet date. Non-monetary assets and liabilities are translated at exchange rate prevailing at the transaction date. Revenue and expenses were translated at the prevailing rate of exchange at the date of the transaction. Related translation adjustments are reported as a separate component of stockholders’ equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations. At June 30, 2024, the foreign currency translation gain/(loss) was $44,734.
8
FLOWER TURBINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2024 and 2023 and for the period ended (unaudited)
Leases
On January 1, 2022, the Company adopted ASC 842, Leases, as amended, which supersedes the lease accounting guidance under Topic 840, and generally requires lessees to recognize operating and finance lease liabilities and corresponding right-of-use (ROU) assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from lease arrangements. The Company adopted the new guidance using a modified retrospective method. Under this method, the Company elected to apply the new accounting standard only to the most recent period presented, recognizing the cumulative effect of the accounting change, if any, as an adjustment to the beginning balance of net assets. Accordingly, prior periods have not been restated to reflect the new accounting standard. The cumulative effect of applying the provisions of ASC 842 had no material impact on net assets.
The Company elected transitional practical expedients for existing leases which eliminated the requirements to reassess existing lease classification, initial direct costs, and whether contracts contain leases. Also, the Company elected to present the payments associated with short-term leases as an expense in statements of operations. Short-term leases are leases with a lease term of 12 months or less. The adoption of ASC 842 had no impact on the Company’s balance sheet as of January 1, 2022.
NOTE 3: GOING CONCERN
The accompanying consolidated 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 is a business that has not yet generated profits since inception, has sustained losses of $1,526,900 and $1,318,578 for the six months ended June 30, 2024 and 2023, respectively, and has negative cash flows from operations for the years ended June 30, 2024 and 2023, respectively and the Company is reliant on continual financing.
The Company’s ability to continue as a going concern in the next twelve months is dependent upon its ability to utilize existing fundraising capital to increase sales and obtain capital financing from investors sufficient to meet current and future obligations and deploy such capital to produce profitable operating results. Management has evaluated these conditions and plans to raise capital as needed to satisfy it liquidity needs through its Regulation A offering in 2023 and increasing its sales. No assurance can be given that the Company will be successful in these efforts. The balance sheet does not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
9
FLOWER TURBINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2024 and 2023 and for the period ended (unaudited)
NOTE 4: STOCKHOLDERS’ EQUITY
Capital Structure
The Company was originally incorporated as a New York limited liability company. The membership interests in such and associated members’ equity were applied to stockholders’ equity and the members were issued common stock in the corporation in exchange for their membership interests in the LLC. Upon conversion to a Delaware corporation in December 2019, the Company authorized 2,500,000 shares of common stock at $0.0001 par value. During 2021, the Company executed a 10-1 stock split and amended it’s Articles of Incorporation increasing its authorized shares to 20,000,000. As of June 30, 2024 and December 31, 2023, 10,477,722 and 10,250,354 shares of common stock were issued and outstanding, respectively.
Stock and Membership Units
In 2023, the Company had raised $3,033,325 through issuance of its common stock pursuant to an offering under Regulation A.
In the six months ended June 30, 2024, the Company has not raised fund through issuance of common stock.
NOTE 5: OPERATING LEASES
On March 1, 2022, the Company entered into a 36-month lease agreement for office space. The lease requires escalating monthly lease payments ranging from $2,955 to $3,076. Lease expense for the period ended June 30, 2024 totaled $18,401.
The following is a schedule of operating lease liability as of June 30, 2024.
2024 | $ | 20,125 | ||
2025 | 6,708 | |||
Total Undiscounted cashflow | 26,833 | |||
Unamortised cost | (613 | ) | ||
Present value of lease liability | 26,220 | |||
Lease Liability, Current | 26,220 | |||
Lease Liability, Non-Current | - | |||
Present Value of Lease Liability | $ | 26,220 |
10
FLOWER TURBINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2024 and 2023 and for the period ended (unaudited)
NOTE 6: RELATED PARTY TRANSACTIONS
The founder of the Company was paid NIL for consultant services for the period ended June 30, 2024 and 2023, respectively.
For period ended June 30, 2024, loan amount of $7,000 is receivable from founder. The loans are unsecured, non-interest bearing and due on demand.
NOTE 7: LOANS PAYABLE
On November 4, 2019, the Subsidiary entered into a loan agreement with a bank for total principal of $56,134. Loan A is for principal of $28,068 and bears interest at 7.5%. The loan requires monthly interest payments for 84 months with a final balloon payment on the maturity date. Loan B is for principal of $28,067, bears interest at a 7.5% fixed rate. The loan requires interest only payments for the first 24 months, followed by principal and interest payments of $468 for the next 60 months, followed by a balloon payment on the last day of the loans. Loans A and B are unsecured. Interest expense for these loans totaled $19,555 and $1,758 for the six months ending June 30, 2024 and 2023, respectively. Accrued interest payable totaled NIL as of June 30,2024 and December 31, 2023. Total unpaid principal balance was $39,325 and $43,317 as of June 30,2024 and December 31,2023, respectively.
Future minimum principal payments under the loans are as follows as of June 30, 2024:
2024 | 4,269 | |||
2025 | 4,601 | |||
2026 | 4,905 | |||
2027 | 5,285 | |||
Therafter | 20,265 | |||
Total | $ | 39,325 |
11
FLOWER TURBINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2024 and 2023 and for the period ended (unaudited)
NOTE 8: RECENT ACCOUNTING PRONOUNCEMENTS
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires a lessee to recognize a right-of-use asset and a lease liability under most operating leases in its balance sheet. The ASU is effective for annual and interim periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted this standard during the current period.
Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying consolidated balance sheet. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.
NOTE 9: COMMITMENTS, CONTINGENCIES, AND CONCENTRATIONS
The Company may be subject to pending legal proceedings and regulatory actions in the ordinary course of business. The results of such proceedings cannot be predicted with certainty, but the Company does not anticipate that the final outcome, if any, arising out of any such matter will have a material adverse effect on its business, financial condition or results of operations. The Company also has unknown impacts from the ongoing COVID-19 pandemic.
NOTE 10: SUBSEQUENT EVENTS
Management’s Evaluation
The Company has evaluated subsequent events through September 14, 2024, the date the consolidated financial statements were available to be issued. Based on the evaluation, no additional material events were identified which require adjustment or disclosure other than those below.
12