| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. For the nine months ended September 30, 2020, the Company had negative retained earnings of $15,636 and an accumulated deficit of $34,862. These matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report. The ability of the Company to continue as a going concern is dependent upon management’s ability to further implement its business plan and, if necessary, raise additional capital as needed from the sales of stock or debt. The accompanying consolidated financial statements do not include any adjustments that might be required should the Company be unable to continue as a going concern.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at dates of the financial statements and the reported amounts of revenue and expenses during the periods. Actual results could differ from these estimates. Our significant estimates and assumptions include depreciation and the fair value of our stock, stock-based compensation, debt discount and the valuation allowance relating to the Company’s deferred tax assets.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid investments with an original maturity of three months or less at the date of purchase. Cash and cash equivalents are carried at cost, which approximates fair value.
As of September 30, 2020, the Company had $281,996 of cash.
Accounts Receivable
Trade accounts receivable are recorded net of allowance for expected uncollectible accounts. The Company extends credit to its customers in the normal course of business and performs on-going credit evaluations of its customers. All accounts, or portions thereof, that are deemed uncollectible are written off to bad debt expense, as incurred. In addition, most sales orders are not accepted without a substantial deposit. As of September 30, 2020, our ledger had $878,829 as an allowance/ provision for collectible accounts.
Inventory
Inventories are stated at the lower of cost or net realizable value using the first-in first-out (FIFO) method. We have four principal categories of inventory:
Sales demonstration inventory -Sales demonstration inventory represents completed product used to support our sales force for demonstrations and held for sale. Sales demonstration inventory is held in our demo facilities or by our sales representatives for up to three years, at which time it will be refurbished and transferred to finished goods as used equipment, stated at the lower of cost or net realizable value. We expect these refurbished units to remain in finished goods inventory and sold within 12 months at prices that produce reduced gross margins.
Equipment parts inventory – This inventory represents components and raw materials that are currently in the process of being converted to a certifiable lot of saleable product through the manufacturing and/or equipment assembly process. Inventories include parts and components that may be specialized in nature and subject to rapid obsolescence. The Company periodically reviews the quantities and carrying values of inventories to assess whether the inventories are recoverable. Because of the Company’s vertical integration, a significant or sudden decrease in sales activity could result in a significant change in the estimates of excess or obsolete inventory valuation. The costs associated with provisions for excess quantities, technological obsolescence, or component rejections are charged to cost of sales as incurred.
Work in process inventory – Work in process inventory consists of inventory that is partially manufactured or not fully assembled as of the date of these financial statements. This equipment, machines, parts, frames, lasers and assemblies are items not ready for use or resale. Costs are accumulated as work in process until sales ready items are compete when it is moved to finished goods inventory. Amounts in this account represent items at various stages of completion at the Registration date.
Finished goods inventory – Finished goods inventory consists of purchased inventory that were fully manufactured, assembled or in salable condition. Finished goods inventory is comprised of items that are complete and ready for commercial application without further cost other that delivery and setup. Finished goods inventory includes demo and other equipment, lasers, software, machines, parts or assemblies.
At September 30, 2020 and December 31, 2019, respectively, our inventory consisted of the following:
September 30, 2020
December 31, 2019
Inventory
Equipment Parts Inventory
146,259
Sales Demo Inventory
495,150
495,150
Work in process Inventory
11,760
Total Inventory
833,328
495,150
Fixed Assets - Plant Machinery and Equipment
Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period.
Machinery and Equipment
Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows:
Economic
Category
Useful Life
Office furniture and fixtures
3-5 years
Machinery and equipment
5-12 years
September 30, 2020
December 31, 2019
Fixed Assets
Equipment and Furniture
Accumulated Depreciation
(19,807)
Machinery & Equipment
158,456
Office and Computer Equipment
8,420
—
R&D Equipment
15,500
Vehicles
2,785
Total Fixed Assets
165,354
As of September 30, 2020, we recorded $165,354 of capital assets net of depreciation. Fixed assets as of December 31, 2019, were recorded at $0.
Intangible Property
As of September 30, 2020, we did not have any intangible property.
Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment is measured by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from use of the assets and their ultimate disposition. In instances where impairment is determined to exist, the Company will writes down the asset to its fair value based on the present value of estimated future cash flows.
Liabilities
Our liabilities consist of current liabilities .
September 30, 2020
December 31, 2019
Current Liability
1,024,958
5,280
Long Term Liability
728,072
0
Total Liabilities
1,753,030
5,280
As of September 30, 2020, and December 31, 2019, our total liabilities were recorded at $ 1,753 ,030 and $5,280, respectively.
Current Liabilities
Our current liabilities consist of accounts payable and deferred revenue.
Sales Tax Liability
Sales tax liability is created when Company sells equipment and services to another entity located in the State of Florida. Currently the sales tax rate in the Company’s County place of business is 6.5%. As of September 30, 2020, our sales tax liability was recorded at $12,566 compared to $0 recorded at December 31, 2019.
Long Term Liabilities
September 30, 2020
December 31, 2019
(Unaudited)
Long Term Liabilities
PPP Loan
198,750
Lease Liability less Current
225,055
Notes
304,267
Total Long Term Liabilities
728,072
Our long term liabilities include a PPP Loan from Axiom Bank, a promissory note to ICT in the principal amount of $439,990 bearing 6% annual interest with a maturity date of January 31, 2023, and long term lease liability. The Note to ICT may be prepaid in whole or in part. As of September 30, 2020, the unpaid principal amount of the Note was $304,267.
Accounts Payable
As of September 30, 2020, and September 30, 2019, our Account Payables were recorded at $6,670 and $0, respectively.
Deferred Revenue
The Company requires deposits on most sales orders. These deposits are recorded as deferred revenue until such time as the revenue recognition criteria for that project are order is completed. As of September 30, 2020, our deferred revenue was recorded at $962,590 in comparison to $0 recorded at December 31, 2019.
Liquidity and Capital Resources
STATEMENTS OF LIABILITY AND STOCKHOLDERS' EQUITY
STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
Additional
Common Stock
Paid-In
Accumulated
Stockholders'
Shares
Amount
Capital
(Deficit/Income)
Equity
BALANCE DECEMBER 31, 2019
—
—
$
—
$
—
$
489,870
Shares issued for cash
$
2,661,316
$
26,613
$
478,893
—
—
Net loss for year ended December 31, 2019
—
—
—
$
(15,636)
—
January 1st - March 31, 2020
—
—
$
—
$
—
—
Shares issued for cash
$
900,000
$
9,000
$
149,456
—
—
Net loss for the period ended March 31, 2020
—
—
—
$
(156,491)
—
BALANCE MARCH 31, 2020
$
3,561,316
$
35,613
$
628,349
$
(172,127)
$
491,835
April 1 - June 30, 2020
—
—
$
—
$
—
—
Shares issued for cash
$
—
$
—
$
—
—
—
Income for period ended June 30, 2020
—
—
—
$
136,712
—
BALANCE JUNE 30, 2020
$
3,561,316
$
35,613
$
628,349
$
(35,415)
$
628,547
July 1 - September 30, 2020
—
—
$
—
$
—
—
Shares issued for cash
$
—
$
—
$
—
—
—
Income for period ended September 30, 2020
—
—
—
$
20,333
—
BALANCE SEPTEMBER 30, 2020
$
3,561,316
$
35,613
$
628,349
$
(15,082)
$
648,879
See accompanying notes to financial statements
On December 31, 2019, the Company purchased from ICT Investments certain sales demonstration equipment valued at $495,150 which the Company will use in its business in exchange for 2,616,316 shares of the Company’s common stock.
On January 1, 2020, the Company purchased from ICT Investments certain capital manufacturing equipment valued at $158,456 which the Company will use in its business in exchange for 900,000 shares of its common stock.
Intangible Assets
The Company’s Intangible assets consist of software and software licenses. As of September 30, 2020, the recorded value was $2,495, in comparison to $0 on December 31, 2019.
Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment is measured by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from use of the assets and their ultimate disposition. In instances where impairment is determined to exist, the Company writes down the asset to its fair value based on the present value of estimated future cash flows.
Net Earnings/ Loss per Share
Basic earnings/loss per share is calculated by dividing the loss attributable to stockholders by the weighted-average number of shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in the earnings (loss) of the Company. Diluted earnings/ loss per share is computed by dividing the earnings/loss available to stockholders by the weighted average number of shares outstanding for the period and dilutive potential shares outstanding unless such dilutive potential shares would result in anti-dilution.
As of September 30, 2020, Company recorded $0.01 net income per share.
Revenue Recognition
Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only apply the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, we assess the goods or services promised within each contract and determine those that are performance obligations, and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Refunds and returns, which are minimal, are recorded as a reduction of revenue. Payments received by customers prior to our satisfying the above criteria are recorded as unearned income in the combined balance sheets.
All revenues were reported net of any sales discounts or taxes.
Promissory Notes
In January 2020, the Company issued a promissory note to ICT in the principal amount of $439,990 bearing 6% annual interest with a maturity date of January 31, 2023. This Note may be prepaid in whole or in part. As of September 30, 2020, the unpaid principal amount of the Note was $304,267.
Fair Value of Financial Instruments
The Company applies the accounting guidance under Financial Accounting Standards Board (“FASB”) ASC 820‑ 10, “Fair Value Measurements”, as well as certain related FASB staff positions. This guidance defines fair value as the price that would be received from m selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact business and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.
The guidance also establishes a fair value hierarchy for measurements of fair value as follows:
◻ Level 1 - quoted market 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 in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities 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 amount of the Company’s financial instruments approximates their fair value as of March 31, 2020, due to the short-term nature of these instruments.
Tax Loss Carryforwards
The Company recognizes deferred tax assets and liabilities for the tax effects of differences between the financial statement and tax basis of assets and liabilities. A valuation allowance is established to reduce the deferred tax assets if it is more likely than not that a deferred tax asset will not be realized.
Off-Balance Sheet Arrangements
During the quarter ended September 30, 2020, we did not engage in any off-balance sheet arrangements as defined in item 303(a)(4) of the SEC’s Regulation S-K.
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Recent Accounting Pronouncements
In June 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014‑10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation”. The update removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. In addition, the update adds an example disclosure in Risks and Uncertainties (Topic 275) to illustrate one way that an entity that has not begun planned principal operations could provide information about the risks and uncertainties related to the company’s current activities. Furthermore, the update removes an exception provided to development stage entities in Consolidations (Topic 810) for determining whether an entity is a variable interest entity-which may change the consolidation analysis, consolidation decision, and disclosure requirements for a company that has an interest in a company in the development stage. The update is effective for the annual reporting periods beginning after December 15, 2014, including interim periods therein. Early application with the first annual reporting period or interim period for which the entity’s financial statements have not yet been issued (Public business entities) or made available for issuance (other entities). The Company adopted this pronouncement for the year ended December 31, 2014.
In June 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014‑12, “Compensation – Stock Compensation ( Topic 718 ); Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The amendments in this ASU apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. For all entities, the amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. Entities may apply the amendments in this ASU either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this Update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. Additionally, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. This updated guidance is not expected to have a material impact on our results of operations, cash flows or financial condition. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
In August 2014, the FASB issued Accounting Standards Update “ASU” 2014‑15 on “Presentation of Financial Statements Going Concern (Subtopic 205‑40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
All other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable. |
