UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
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EXPLANATORY NOTE
Background of Restatement
On November 15, 2023, the Company filed a Current Report on Form 8-K disclosing that the March 31, 2023 and June 30, 2023 financial statements included in the Company’s Quarterly Reports on Form 10-Q (the “Original Financial Statements”) should no longer be relied upon.
While preparing the financial statements as of and for the quarter ended September 30, 2023, the Company determined that it was necessary to reassess its revenue recognition policy with respect to the accounting treatment for $200,000 in fees the Company recognized as revenue in March 2023 related to Futuro Houses dealer territory agreements. In its reassessment, the Company concluded that such fees represent a symbolic intellectual license and pursuant to ASC 606, Revenue from Contracts with Customers, should be recognized over the expected term of the dealer agreements instead of at the time of receipt in the first quarter. As a result of the misapplication of ACS 606, our previously issued financial statements for the first quarter of 2023 contained an error, overstating revenue by $179,498 in the statement of operations and understating deferred revenue in the balance sheet by the same amount. Our previously issued financial statements as of and for the six months ended June 30, 2023 continued this error, overstating revenue by $129,498 in the statement of operations and understating deferred revenue in the balance sheet by the same amount. These dealer territory agreements were only first entered into by the Company in 2023 and as a result there is no effect on the Company’s financial statements in 2022 or earlier periods.
Internal Control Considerations
The Company has also concluded that because the controls surrounding the financial reporting process did not operate effectively and resulted in the failure to detect the misstatement, the deficiency is a material weakness in the Company’s internal control over financial reporting, resulting in a material error in the Original Financial Statements.
Items Amended in this Amended Quarterly Report
For the convenience of the reader, this Amendment No. 1 sets forth the information in the Original Form 10-Q in its entirety, as such information is modified and superseded where necessary to reflect the restatement and related revisions. The following sections in the Original Form 10-Q are revised in this Amendment No. 1 to reflect this restatement:
| ● | Part I, Item 1. | Financial Information |
| ● | Part I, Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| ● | Part I, Item 4. | Controls and Procedures |
Additionally, in accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, the Company is including with this Amendment No. 1 currently dated certifications from its Chief Executive Officer and its Chief Financial Officer.
Except as described above, this Amendment No. 1 does not amend, update or change any other disclosures in the Original Form 10-Q. In addition, the information contained in this Amendment No. 1 does not reflect events occurring after the Original Form 10-Q and does modify or update the disclosures therein, except to reflect matters related to the restatement noted above.
Table of Contents
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PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
US LIGHTING GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2023 | December 31, 2022 | |||||||
| As Restated (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Inventory | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accrued payroll to a former officer | ||||||||
| Convertible notes payable | ||||||||
| Loan payable– current portion | ||||||||
| Loans payable, related party | ||||||||
| Total Current Liabilities | ||||||||
| Loans payable, net of current portion | ||||||||
| Loans Payable, related party | ||||||||
| Total Liabilities | $ | $ | ||||||
| Commitments and Contingencies | ||||||||
| Shareholders’ Equity: | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Shareholders’ Equity | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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US LIGHTING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months ended June 30, | For the Six Months ended June 30, | |||||||||||||||
| 2023 Restated | 2022 | 2023 Restated | 2022 | |||||||||||||
| Sales | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income (expense): | ||||||||||||||||
| Other income, net | ||||||||||||||||
| Unrealized gain (loss) | ( | ) | ( | ) | ||||||||||||
| Realized loss | ( | ) | ||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense, related party | ||||||||||||||||
| Gain on disposal of fixed assets | ||||||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Basic income (loss) per share | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Diluted income (loss) per share | $ | $ | $ | $ | ||||||||||||
| Weighted average common shares outstanding, basic | ||||||||||||||||
| Weighted average common shares outstanding, diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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US LIGHTING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023, AND 2022
(Unaudited)
| Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| As Restated | ||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Proceeds from sales of Common Stock | — | |||||||||||||||||||||||||||
| Net Loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock Issued for Services & Compensation | — | — | ||||||||||||||||||||||||||
| Net Income | — | — | ||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Net Loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2022 | ( | ) | ||||||||||||||||||||||||||
| Net Loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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US LIGHTING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Six Months Ended June 30, | ||||||||
| 2023 As Restated | 2022 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Stock issued for services & compensation | ||||||||
| Realized gain from investments | ||||||||
| Unrealized gain from investments | ||||||||
| Changes in Assets and Liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ||||||||
| Prepaid expenses and other | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Customer advanced payments | ||||||||
| Accrued expenses | ( | ) | ||||||
| Accrued interest on related party loans | ||||||||
| Accrued interest on loans | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Sale of fixed assets | ||||||||
| Proceeds from investments | ||||||||
| Net cash (used in) provided by investing activities | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from sale of common stock | ||||||||
| Proceeds from loans payable | ||||||||
| Payment of loans payable | ( | ) | ||||||
| Payments on notes payable related party | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash beginning of period | | |||||||
| Cash end of period | $ | $ | ||||||
| Supplemental Cash Flow Information: | ||||||||
| Interest paid | $ | $ | ||||||
| Taxes paid | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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US LIGHTING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
NOTE 1 – ORGANIZATION
US Lighting Group, Inc. (the “Company”) is a parent company comprised of four subsidiaries — Cortes Campers, LLC, a brand of high-end molded fiberglass campers, Futuro Houses, LLC, which is focused on design and sales of molded fiberglass homes, Fusion X Marine, LLC, a high-performance boat designer, and MIG Marine Corporation, a composite manufacturing company that produces proprietary molded fiberglass products for our other business lines.
On January 11, 2021, we formed Cortes Campers to operate our new brand of innovative travel trailers. During the second part of 2021, we invested heavily in research and development as well as production planning for the 17-foot camper and began selling campers in early 2022.
On January 12, 2022, we formed Futuro Houses, LLC, a Wyoming company, to design, market and distribute molded fiberglass homes. Throughout 2022, Futuro Houses engaged in engineering and development of our first “UFO” themed home model inspired by the original Futuro house designed by Finnish architect Matti Suuronen.
On August 5, 2022, we acquired MIG Marine Corporation, a fiberglass manufacturing company founded in 2003. With the acquisition of Mig Marine, we were able to streamline our manufacturing processes, improve production cycles and scale to meet the demand of Cortes Campers generated order back-log.
We plan to expand our manufacturing footprint, enhance production techniques, and develop more products in the RV, marine, and composite housing sectors. Current R&D efforts are directed towards future tow-behind camper models under the Cortes Campers brand as well as prefabricated housing segment.
As of March 31, 2023, our revenue was driven by shipments of fiberglass campers marketed under the Cortes Campers brand and to a lesser extent from dealerships for the Futuro Housing brand.
The Company is a Florida corporation founded in 2003. We are located in Euclid, Ohio
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and reflect all adjustments, consisting of normal recurring adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company as of and for the six month period ending June 30, 2023 and not necessarily indicative of the results to be expected for the full year ending December 31, 2023. These unaudited financial statements should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Restatement of Previously Issued Financial Statements
The Company’s previously issued financial statements as of
and for the three and six months ended June 30, 2023, contained an error in the Balance Sheet and Statement of Operations related to
the revenue recognition for Dealer Territory arrangements. In the previously issued financial statements, $
5
The effects of the correction of the prior-period misstatement to the specific line items previously presented in the condensed consolidated financial statements are reflected in the tables below:
| For the Six Months Ended June 30, 2023 | ||||||||||||
| As Previously Reported | Adjustments | As Restated | ||||||||||
| Balance Sheet: | ||||||||||||
| Deferred revenue | ||||||||||||
| Current liabilities | ||||||||||||
| Total liabilities | ||||||||||||
| Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||
| Total Shareholders’ Equity (Deficit) | ( | ) | ( | ) | ( | ) | ||||||
| Statement of Operations | ||||||||||||
| Sales | ( | ) | ||||||||||
| Gross profit | ( | ) | ||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
| Statement of Cash Flows | ||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
| Deferred revenue | ||||||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||||||
| For the Three Months Ended June 30, 2023 | ||||||||||||
| As Previously Reported | Adjustments | As Restated | ||||||||||
| Statement of Operations | ||||||||||||
| Sales | ||||||||||||
| Gross profit | ||||||||||||
| Income (loss) from operations | ( | ) | ||||||||||
| Net income (loss) | ( | ) | ||||||||||
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the estimated useful lives of property and equipment. Actual results could differ from those estimates.
Concentrations of Credit Risk
We maintain our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently have not experienced any losses in our accounts. We believe we are not exposed to any significant credit risk on cash.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
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Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Cortes Campers, LLC, Fusion X Marine, LLC, Mig Marine Corp. and Futuro Houses, LLC. All intercompany transactions and balances have been eliminated in consolidation.
Revenue Recognition
Revenue is recognized as performance obligations under the terms of contracts with customers are satisfied.
Unit Sales
The Company’s primary source of revenue is generated through the sale of molded fiberglass campers and homes (units). Unit sales are recognized at a point- in-time when the performance obligation is satisfied and control of the promised goods or services is transferred to the customer, which generally occurs when the unit is shipped to or picked-up from our facility by the customer. Control refers to the ability of the customer to direct the use of, and obtain substantially all of, the remaining benefits from the goods or services. Unit payment terms include deposits payable prior to delivery or on terms of 60 days or less post-delivery.
Net sales include shipping and handling charges billed directly to customers. Any shipping and handling costs that occur after the transfer of control are treated as fulfillment cost that are accrued when control is transferred. We also have made an accounting policy election to exclude from revenue sales and usage-based taxes collected.
Dealer Arrangement Fees
Beginning in 2023, the Company began to enter into certain arrangements with dealers providing exclusive selling rights for geographic territories. The arrangements typically include provisions that in exchange for the territory rights, dealers pay an initial up-front one-time only fee. Subject to meeting minimum unit sale levels on an annual basis, the arrangement automatically renews for an additional year with no additional fee.
The intellectual property subject to the exclusive territory rights is symbolic intellectual property as it does not have significant standalone functionality, and substantially all of the utility is derived from its association with the Company’s past or ongoing activities. The dealer arrangements are highly interrelated with the Company’s performance obligations to produce future units, further develop the brand and provide training and support to dealers and as such are considered to represent a single performance obligation.
The Company recognizes dealer territory fees over the expected term of the arrangement which includes estimated annual renewal periods. Changes in the estimate of renewal periods are accounted for prospectively from the period of the change in estimate by adjusting the remaining unrecognized revenue over the remaining estimated term. As these fees are typically received in cash at or near the execution of the arrangement, the cash received is initially recorded as a contract liability in deferred revenue until recognized as revenue over time.
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Other
The table below provides the break-out of net sales from unit sales and dealer territory fees recognized in the respective periods:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Unit sale (point in time) | $ | $ | $ | $ | ||||||||||||
| Dealer Territory fees (over time) | ||||||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||
Recently Accounting Pronouncements
The Company has implemented all new applicable accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 3 – LIQUIDITY
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.
During the six months ended June 30, 2023, the Company recognized
a net loss of $
At June 30, 2023, the Company had cash on hand in the amount of
$
NOTE 4 – SALE OF ASSETS
On May 17, 2020, the Company purchased $
As a result of the Company’s purchase of mutual fund assets,
the Company could have been deemed to be an “investment company” under the Investment Company Act of 1940 (the “Investment
Company Act”). However, the Company did not intend to be an investment company and never intended to be engaged in the business
of investing, reinvesting, owning, holding or trading in securities. Based on these facts, the Company relied on Rule 3a-2 under the Investment
Company Act, which provides an exclusion from the definition of “investment company” for issuers meeting certain criteria.
The Company endeavored to ensure that it was compliant with the conditions for relying on this rule within the time period permitted by
Rule 3a-2. To comply with this exclusion, the Company has liquidated all of the mutual fund assets and no longer owns securities having
a value exceeding
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NOTE 5 – PROPERTY AND EQUIPMENT
| June 30, 2023 | December 31, 2022 | |||||||
| Building and improvements | $ | $ | ||||||
| Land | | | ||||||
| Vehicles | | | ||||||
| Office equipment | | | ||||||
| Production molds and fixtures | | | ||||||
| Tooling and fixtures | | | ||||||
| Other equipment | | | ||||||
| Furniture and fixtures | | | ||||||
| Total property and equipment cost | | | ||||||
| Less: accumulated depreciation and amortization | ( | ( | ||||||
| Property and equipment, net | $ | $ | ||||||
NOTE 6 – ACCRUED PAYROLL TO OFFICER
Beginning in January 2018, the Company’s former CEO voluntarily
elected to defer payment of his employment compensation. The balance of the compensation owed to the Company’s former CEO was $
NOTE 7 – LOANS PAYABLE TO RELATED PARTIES
| 2023 | 2022 | |||||||
| Loan payable to officers/shareholders (a) | $ | $ | ||||||
| Loan Payable to related party - past due (b) | ||||||||
| Total loans payable to related parties | ||||||||
| Loan payable to related party, current portion | ( | ) | ( | ) | ||||
| Total loans payable to related parties | ||||||||
| a. |
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| b. |
Loan payments to related parties were made through a combination of direct payments to the noteholder and instructions from the noteholder to pay obligations to others on their behalf.
NOTE 8 – LOANS PAYABLE
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Real Estate loan (a) | $ | $ | ||||||
| Vehicle loans (b) | ||||||||
| Working capital (c) (d) | ||||||||
| Total loans payable | ||||||||
| Loans payable, current portion | ( | ) | ( | ) | ||||
| Loans payable, net of current portion | $ | $ | ||||||
| a. |
| b. |
| c. |
| d. |
NOTE 9 – SHAREHOLDERS’ EQUITY
Common Shares Issued for Cash
During the quarter ended June 30, 2023, the Company did not issue any shares of stock for cash.
Summary of Warrants
There were no warrants granted or exercised during the six months ended June 30, 2023.
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NOTE 10 – INCOME TAXES
At December 31, 2021, the Company had available Federal and state
net operating loss carryforwards to reduce future taxable income. The amounts available were approximately$
Effective January 1, 2007, the Company adopted FASB guidelines
that address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial
statements. Under this guidance, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that
the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than
The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of June 30, 2023, and December 31, 2022, the Company has not accrued interest or penalties related to uncertain tax positions. Additionally, tax years 2018 through 2022 remain open to examination by the major taxing jurisdictions to which the Company is subject.
Upon the attainment of taxable income by the Company, management will assess the likelihood of realizing the tax benefit associated with the use of the carryforwards and will recognize the appropriate deferred tax asset at that time.
NOTE 11 – LEGAL PROCEEDINGS
There were no reportable legal proceedings initiated during the quarter ended June 30, 2023.
NOTE 12 – SUBSEQUENT EVENTS
On July 14, 2023, we entered into a common stock purchase agreement
with Alumni Capital LP establishing an equity line pursuant to which Alumni agreed to purchase up to $
On July 17, 2023, the Company entered into a promissory note with
its CEO and President Anthony Corpora for $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This quarterly report contains statements that are forward-looking within the meaning of Section 21E of the Exchange Act. Forward-looking statements are statements other than historical facts, including, without limitation, statements that are identified by words like “may,” “could,” “would,” “should,” “will,” “believe,” “expect,” “anticipate,” “plan,” “predict,” “estimate,” “target,” “project,” “intend,” or similar expressions. These statements include, among others, statements regarding our current expectations, estimates and projections about future events and financial trends affecting the financial condition and operations of our business. These statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those expressed. You should not rely solely on these forward-looking statements and should consider all uncertainties and risks throughout this document. Forward-looking statements are only predictions and not guarantees of performance and speak only as of the date they are made. We do not undertake to update any forward-looking statement in light of new information or future events.
Although we believe that the expectations, estimates and projections reflected in the forward-looking statements in this report are based on reasonable assumptions when they were made, we cannot assure you that these expectations, estimates and projections will be achieved. We believe the forward-looking statements in this report are reasonable; however, you should not place undue reliance on any forward-looking statements, as they are based on current expectations. Future events and actual results may differ materially from those discussed in the forward-looking statements. Some of the factors that could cause actual results to differ materially from our expectations are discussed Risk Factors beginning on page 6 of our Annual Report on Form 10-K for the year ended December 31, 2022.
Restatement of Previously Issued Financial Statement
As discussed in the Explanatory Note to this Amendment No. 1, included in the interim condensed consolidated financial statements, the Company has restated certain information contained in its previously issued unaudited interim condensed financial statements as of and for period ended June 30, 2023, related to an error in the recognition of revenue related to Futuro Houses dealer territory arrangements.
In this Amendment No. 1, the Company has restated the related financial statement line items impacted. In additions, for further information regarding the matters leading to the restatement and related findings with respect to the Company’s disclosure controls and procedures and internal control over financial reporting, refer to Item 4. Controls and Procedures in Part I of this Amendment No. 1.
General Overview
Unless the context otherwise requires, references in this report to “USLG,” the “company,” “we,” “us” and “our” refer to US Lighting Group, Inc. and its wholly-owned subsidiaries: Cortes Campers, LLC, a brand of high-end molded fiberglass campers; Futuro Houses, LLC, focused on design and sales of molded fiberglass homes; Fusion X Marine, LLC, a high-performance boat designer; and MIG Marine Corporation, a composite manufacturing company that produces proprietary molded fiberglass products for our three business lines.
We are an innovative composite manufacturer utilizing advanced fiberglass technologies in growth sectors such as high-end recreational vehicles (RVs), prefabricated off-grid houses, and high-performance powerboats. We derive expertise and inspiration from the marine industry, where the harshest conditions are expected and met with superior engineering and the latest in composite technology. Molded fiberglass products are exceptionally strong, lightweight, and durable. Composite materials are also corrosion resistant and provide efficient insulation, making them attractive for both outdoor enthusiasts and residential housing needs. Molded construction allows for the creation of irregular, unusual or circular objects, which permits the innovative shapes and features of our products. As of June 30, 2023, our revenue was driven by shipments of fiberglass campers marketed under Cortes Campers brand.
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Cortes Campers designs and manufactures high-end molded fiberglass RV travel trailers and campers designed for comfort, style and durability. We utilize superior quality materials and fiberglass construction resulting in significantly stronger, more durable and lighter weight products. Cortes Campers’ first product is the Cortes 17, a 17-foot long single axle tow-behind molded fiberglass camper. In the second quarter of 2023, we introduced a new floorplan, Cortes 16, which has expanded sleeping capacity with a king size bed. We are currently developing additional models, including a larger, family-oriented all composite 22-foot travel trailer. Cortes Campers has established a network of professional RV dealerships to market and distribute its products. As of June 30, 2023, Cortes Campers are available through 37 dealer locations in US and Canada.
Recognizing that we could utilize many of the same technologies and manufacturing processes we have perfected for the Cortes Campers line of RVs to make small, prefabricated homes, we began exploring the market in early 2022. The international tiny-house movement has gained new relevance in the recent years as the quest for off-grid, rugged, prefabricated homes has entered the mainstream and was further fueled by the COVID-19 pandemic. We named our modular housing line Futuro Houses after the Futuro Pod, the iconic “UFO house” designed by Finnish architect Matti Suuronen, of which fewer than one hundred were built during the late 1960s and early 1970s. Our first home design is an update of the original Futuro utilizing modular construction and fiberglass for structural integrity and energy efficiency and designed to address modern residential requirements in a 600-square-foot living space. The Futuro can also serve as a commercial structure as it is currently available as a “shell kit” to be outfitted by consumers to meet their needs. We exhibited the Futuro house at the Cleveland Home & Remodeling Expo in March 2023, signed our first distributor in New York, and sold our first home in May 2023.
In early 2021, we formed Fusion X Marine to design, manufacture and distribute high-performance speed boats utilizing advanced fiberglass composites. Our first boat model is the X-15, a miniature speed boat designed for rental sites and excursions, as well as to serve as an entry-level boat for first time buyers. Tooling and molds have been developed for this model and the X-15 is expected to go into production in the fourth quarter of 2023. The similarly styled X-27 is a 27-foot fiberglass V-hull speedboat and is designed for speed and superior maneuverability. The tooling and molds for the X-27 are currently under development and the model is not yet available for pre-orders. As of June 30, 2023, Fusion X Marine has not generated revenue for us.
We plan to expand our manufacturing footprint, enhance production techniques, and develop more products in the RV, marine and composite housing sectors. Our current R&D efforts are focused on future tow-behind camper models under Cortes Campers brand as well as prefabricated housing segment.
Our headquarters, manufacturing and research and development facilities are located at 1148 East 222nd Street, Euclid, Ohio, 44117. Our website is www.USLightingGroup.com.
Recent Events
Cortes Campers will exhibit at the largest RV industry consumer and trade shows in the fall of 2023, the Hershey RV show in Pennsylvania and the Elkhart RV Dealer Open House in Indiana.
On July 14, 2023, we entered into a common stock purchase agreement with Alumni Capital LP establishing an equity line pursuant to which Alumni agreed to purchase up to $1.0 million of our common stock, subject to the terms of the purchase agreement. The purchase agreement will expire on the earlier of March 31, 2024 or when Alumni has purchased the full $1.0 million of our stock. In the purchase agreement, we agreed to file a registration statement to register the resale of any shares we sell to Alumni, and to use our best efforts to cause the registration statement to be declared effective and remain effective until the Alumni shares have been sold. Once the registration statement is effective, we may request that Alumni purchase shares of our stock, subject to the limitations included in the purchase agreement. We have not yet filed the registration statement or sold any stock to Alumni pursuant to the purchase agreement.
On June 13, 2023, USLG held its 2023 annual meeting of shareholders. At the meeting, our shareholders: (i) elected Anthony C. Corpora, Patricia A. Salaciak and Olga Smirnova to our board of directors; and (ii) ratified the appointment of the accounting firm of BF Borgers CPA PC to serve as our independent registered public accounting firm for 2023.
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Results of Operations for the Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022
Sales
Total sales for the quarter ended June 30, 2023, were $1,311,833, compared to $49,000 for the second quarter of 2022, an increase of $1,262,833. The increase in sales is attributed to current quarter sales of $1,212,833 of recreational vehicles (RV) and related components sales by Cortes Campers and $50,000 of revenue from Futuro Houses dealer license fees.
Cost of Goods Sold
Cost of goods sold for the quarter ended June 30, 2023, were $820,916, compared to $44,000 for the second quarter of 2022. The increase in cost of goods sold relates to camper sales by Cortes Campers.
Operating Expenses
Selling, general and administrative expenses were $477,193 for the quarter ended June 30, 2023, compared to $325,000 for the second quarter of 2022, an increase of $152,193, or 46.8%. The increase over the prior year is attributed to increased personnel costs associated with Cortes Campers.
Other Income/Expense
During the quarter ended June 30, 2023, we had total other expense of $9,269, compared to $80,000 for the second quarter of 2022.
Net Income (Loss)
As a result of the factors discussed above, we had net income of $4,455 for the quarter ended June 30, 2023, compared to a net loss of $400,000 for the second quarter of 2022.
Results of Operations for the Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022
Sales
Total sales for the six months ended June 30, 2023, were $2,337,570, compared to $125,000 for the six months ended June 30, 2022, an increase of $2,212,570. The increase in sales is attributed primarily to Cortes Campers sales.
Cost of Goods Sold
Cost of goods sold for the six months ended June 30, 2023, were $1,522,235, compared to $112,000 for the six months ended the June 30, 2022. The increase in cost of goods sold in 2023 relates primarily to the increase in camper sales by Cortes Campers.
Operating Expenses
Selling, general and administrative expenses (“SG&A”) were $949,542 for the six months ended June 30, 2023, compared to $591,000 for the first six months of 2022, an increase of $358,542, or 61%. The increase over the prior year is attributed to increased personnel costs associated with Cortes Campers and professional fees related to reporting as a public company.
Other Income/Expense
During the six months ended June 30, 2023, we had total other expense of $16,066, all relating to interest expense. This compares to $198,000 for the first six months of 2022, which included other income of $94,000, unrealized loss from investments of $274,000, realized loss from investments of $18,000, interest income of $3,000, interest expense of $16,000 and gain on disposal of fixed assets of $13,000.
Net Income (Loss)
As a result of the factors discussed above, we had a net loss $150,273 for the six months ended June 30, 2023, compared to a net loss of $776,000 for the first six months of 2022. Our overall net loss decreased mainly due to increased sales.
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Liquidity and Capital Resources
Net cash used in operating activities for the six months ended June 30, 2023, was $155,769 compared to $732,000 for the first six months of 2022.
Net cash used in investing activities was $344,258 for the six months ended June 30, 2023, compared to $1,022,000 of cash provided by investing activities for the first six months of 2022. The difference is primarily due to proceeds of $1,023,000 received from trading securities as compared with a much larger investment in fixed assets of $344,258 for the first six months of 2023.
Net cash provided by financing activities for the six months ended June 30, 2023 was $386,526 which included proceeds of $173,125 received from the sale of common stock and proceeds of $213,401 from loans payable. Net cash used in financing activities for the first six months of 2022 was $457,000, which was all for the repayment of loans payable.
Critical Accounting Policies and Estimates
Please refer to our Annual Report on Form 10-K for the year ended December 31, 2022, for a full discussion of our critical accounting policies. In this Amendment No. 1, the Company is amending and replacing its previously disclosed accounting for revenue recognition to the following:
Unit Sales
The Company’s primary source of revenue is generated through the sale of molded fiberglass campers and homes (units). Unit sales are recognized at a point- in-time when the performance obligation is satisfied and control of the promised goods or services is transferred to the customer, which generally occurs when the unit is shipped to or picked-up from our facility by the customer. Control refers to the ability of the customer to direct the use of, and obtain substantially all of, the remaining benefits from the goods or services. Unit payment terms include deposits payable prior to delivery or on terms of 60 days or less post-delivery.
Net sales include shipping and handling charges billed directly to customers. Any shipping and handling costs that occur after the transfer of control are treated as fulfillment cost that are accrued when control is transferred. We also have made an accounting policy election to exclude from revenue sales and usage-based taxes collected.
Warranty obligations associated with the sale of a unit are assurance-type warranties that are a guarantee of the unit’s intended functionality and, therefore, do not represent a distinct performance obligation within the context of the contract.
Dealer Arrangement Fees
Beginning in 2023, the Company began to enter into certain arrangements with dealers providing exclusive selling rights for geographic territories. The arrangements typically include provisions that in exchange for the territory rights, dealers pay an initial up-front one-time only fee. Subject to meeting minimum unit sale levels on an annual basis, the arrangement automatically renews for an additional year with no additional fee.
The intellectual property subject to the exclusive territory rights is symbolic intellectual property as it does not have significant standalone functionality, and substantially all of the utility is derived from its association with the Company’s past or ongoing activities. The dealer arrangements are highly interrelated with the Company’s performance obligations to produce future units, further develop the brand and provide training and support to dealers and as such are considered to represent a single performance obligation.
The Company recognizes dealer territory fees over the expected term of the arrangement which includes estimated annual renewal periods. Changes in the estimate of renewal periods are accounted for prospectively from the period of the change in estimate by adjusting the remaining unrecognized revenue over the remaining estimated term. As these fees are typically received in cash at or near the execution of the arrangement, the cash received is initially recorded as a contract liability in deferred revenue until recognized as revenue over time.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Because USLG is a “smaller reporting company” as defined by the Securities and Exchange Commission we are not required to provide additional market risk disclosure.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
As required by Rules 13(a)-15(e) and 15(d)-15(e) under the Exchange Act, at the time the Original Form 10-Q was filed, our Chief Executive Officer and Chief Financial Officer carried out evaluations of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2023, and concluded that our disclosure controls and procedures were effective. After filing the Original Form 10-Q, the Company identified a material weakness in internal control over financial reporting as described below. As a result, our Chief Executive Officer and Chief Financial Officer have re-evaluated the disclosure controls and procedures and concluded that our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) under the Exchange Act) were not effective as of June 30, 2023, due to the material weakness in internal control over financial reporting as described below.
Material Weakness in Internal Control over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Management identified a material weakness in our internal control over financial reporting as of June 30, 2023 that prevented us appropriately determining the required revenue recognition accounting treatment for fees received from Futuro Houses dealer territory agreements, which was a new type of transaction for the Company beginning in 2023.
Remediation Plan
With oversight from the Board of Directors and input from management, the Company has begun designing and implementing changes in processes and controls to remediate the material weakness described above and to enhance our internal control over financial reporting, including a control to review types of transactions we are encountering for the first time and more extensively evaluating the applicable accounting guidance including where applicable seeking outside advisory services to assist us in that evaluation.
Changes in Internal Control over Financial Reporting
Other than described above, there have been no changes in our internal control over financial reporting during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
Th As previously reported, an indictment was filed on September 16, 2021 and unsealed on October 8, 2021 against Paul Spivak, our former chief executive officer and a major shareholder of the company, Mr. Spivak’s wife, Olga Smirnova, our vice president of finance and administration and a member of our board of directors, and others, alleging fraudulent sales of stock of USLG by Mr. Spivak and others (United States of America v. P. Spivak, O. Smirnova, et al., Case No. L21CR491, United States District Court for the Northern District of Ohio, Eastern Division). The events outlined in the indictment allegedly occurred between June 2016 and June 2021. The alleged acts include issuing favorable press releases to artificially inflate the price of USLG’s stock, selling shares that benefited Mr. Spivak and others while the price was artificially inflated, and paying illegal commissions to unlicensed brokers to sell USLG’s shares. On June 29, 2023, a second superseding indictment was filed in the case naming additional defendants not affiliated with USLG and making additional allegations against Mr. Spivak, including engaging in a conspiracy to obstruct justice and making false declarations before the court. We have been advised that Mr. Spivak and Ms. Smirnova have pled not guilty, vehemently deny the charges, and are defending themselves aggressively.
Item 1A. Risk Factors.
Please refer to the risk factors listed under “Item 1A: Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 for information relating to certain risk factors applicable to USLG.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the quarter ended June 30, 2023, we issued 56,250 unregistered shares of our common stock for compensatory purposes as described in more detail below.
On June 30, 2023, we issued a total of 22,500 unregistered shares to three of our Mig Marine employees as a bonus reflecting their contribution to the company during the first quarter of 2023. The issuance of bonus shares to our employees was exempt from registration under Section 4(a)(2) of the Securities Act.
On June 30, 2023, we issued 10,000 unregistered shares to an accredited outside consultant for assistance with workplace related compliance matters provided to USLG during the first and second quarters. The issuance of shares for consulting services was exempt from registration under Section 4(a)(2) of the Securities Act.
On June 30, 2023, we issued 23,750 unregistered shares to an accredited former employee of the company for reimbursement of $2,375 of USLG expenses he previously paid for while employed by USLG. The issuance of shares to reimburse the former employee was exempt from registration under Section 4(a)(2) of the Securities Act.
On June 8, 2023, we purchased 10,000 shares of our common stock from a private investor for $2,500. We purchased the shares directly from the investor in a private transaction at the request of the investor. We did not purchase any of our shares in the market during the second quarter and currently have no further plans to repurchase any of our shares.
Item 3. Defaults Upon Senior Securities.
During the quarter ended June 30, 2023, USLG was not in material default with respect to any of its material indebtedness.
Item 4. Mine Safety Disclosures.
We are not engaged in mining operations.
Item 5. Other Information.
We have disclosed on Form 8-K all reportable events that occurred in the quarter ended June 30, 2023.
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Item 6. Exhibits.
| Exhibit Number |
Description of Exhibit | |
| 31.1 | Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2 | Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1 | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, US Lighting Group, Inc. has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| US Lighting Group, Inc. | |
| December 12, 2023 | /s/ Anthony Corpora |
| By Anthony Corpora, Chief Executive Officer (Principal Executive Officer) | |
| December 12, 2023 | /s/ Donald O. Retreage, Jr. |
| By Donald O. Retreage, Jr., Chief Financial Officer (Principal Financial Officer) | |
| December 12, 2023 | /s/ Michael A. Coates |
| By Michael A. Coates, Corporate Controller (Principal Accounting Officer) |
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