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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 5/15/23 Forge Innovation Dev Corp. 10-Q 3/31/23 42:2.3M M2 Compliance LLC/FA |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 364K
2: EX-31.1 Certification -- §302 - SOA'02 HTML 18K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 18K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 15K
10: R1 Cover HTML 62K
11: R2 Consolidated Balance Sheets HTML 141K
12: R3 Consolidated Balance Sheets (Parenthetical) HTML 36K
13: R4 Consolidated Statements of Operations (Unaudited) HTML 68K
14: R5 Consolidated Statements of Cash Flows (Unaudited) HTML 81K
15: R6 Consolidated Statements of Changes in Equity HTML 48K
16: R7 Organization and Description of Business HTML 25K
17: R8 Summary of Significant Accounting Policies HTML 27K
18: R9 Going Concern HTML 18K
19: R10 Real Estate Investments HTML 23K
20: R11 Income Taxes HTML 21K
21: R12 Related Party Transactions HTML 32K
22: R13 Commercial and SBA Loans HTML 24K
23: R14 Acquisition of Legend HTML 30K
24: R15 Contingencies HTML 19K
25: R16 Subsequent Event HTML 16K
26: R17 Summary of Significant Accounting Policies HTML 36K
(Policies)
27: R18 Real Estate Investments (Tables) HTML 21K
28: R19 Acquisition of Legend (Tables) HTML 26K
29: R20 Organization and Description of Business (Details HTML 54K
Narrative)
30: R21 Going Concern (Details Narrative) HTML 17K
31: R22 Schedule of Real Estate Investments (Details) HTML 27K
32: R23 Income Taxes (Details Narrative) HTML 20K
33: R24 Related Party Transactions (Details Narrative) HTML 71K
34: R25 Commercial and SBA Loans (Details Narrative) HTML 35K
35: R26 Schedule of Assets Acquired and Liabilities Fair HTML 53K
Values (Details)
36: R27 Acquisition of Legend (Details Narrative) HTML 35K
37: R28 Contingencies (Details Narrative) HTML 20K
40: XML IDEA XML File -- Filing Summary XML 66K
38: XML XBRL Instance -- form10-q_htm XML 338K
39: EXCEL IDEA Workbook of Financial Reports XLSX 57K
6: EX-101.CAL XBRL Calculations -- fgnv-20230331_cal XML 102K
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42: ZIP XBRL Zipped Folder -- 0001493152-23-016924-xbrl Zip 105K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
i ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended i March 31, i 2023 /
OR
i ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File No. i 333-218248
i FORGE INNOVATION DEVELOPMENT CORP.
(Exact name of small business issuer as specified in its charter)
| i nevada | i 81-4635390 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
N/A
( Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Not applicable | Not applicable | Not applicable |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. i Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). i Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer ☐ | Accelerated filer ☐ |
| i Non-accelerated filer ☐ | Smaller reporting company i ☒ |
| Emerging growth company i ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. i ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ i No ☒
The number of shares of Common Stock, $0.0001 par value of the registrant outstanding at May 12, 2023, was .
FORGE INNOVATION DEVELOPMENT CORP.
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2023
TABLE OF CONTENTS
| i |
FRORGE INNOVATION DEVELOPMENT CORP.
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 1 |
FORGE INNOVATION DEVELOPMENT CORP. AND SUBSIDIARIES
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | i 8,943 | $ | i 11,734 | ||||
| Account receivable | i 85,779 | - | ||||||
| Prepaid expense and other current assets | i 68,688 | i 16,521 | ||||||
| Total Current Assets | i 163,410 | i 28,255 | ||||||
| NONCURRENT ASSETS | ||||||||
| Property and equipment, net | i 77,423 | i 83,636 | ||||||
| Real estate investments | i 7,888,323 | - | ||||||
| Rent deposit | i 13,953 | i 13,953 | ||||||
| Total Non-Current Assets | i 7,979,699 | i 97,589 | ||||||
| TOTAL ASSETS | $ | i 8,143,109 | $ | i 125,844 | ||||
| LIABILITIES AND EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued liabilities | $ | i 108,263 | $ | i 4,029 | ||||
| i 74,370 | i 60,000 | |||||||
| Unearned revenue | i 44,957 | i 13,124 | ||||||
| Rent payable | i 83,070 | i 83,070 | ||||||
| Loans payable to related parties | i 658,000 | - | ||||||
| Loans, current | i 3,925,734 | i 8,236 | ||||||
| Total Current Liabilities | i 4,894,394 | i 168,459 | ||||||
| Long term portion of Chase auto loan | i 34,210 | i 36,222 | ||||||
| Long term portion of SBA loan | i 12,295 | i 12,502 | ||||||
| Security deposits | i 121,893 | - | ||||||
| Total Non-Current Liabilities | i 168,398 | i 48,724 | ||||||
| TOTAL LIABILITIES | i 5,062,792 | i 217,183 | ||||||
| COMMITMENTS AND CONTINGENCIES | - | - | ||||||
| EQUITY (DEFICIT) | ||||||||
| Preferred stock, $. par value, shares authorized; share issued and outstanding | - | - | ||||||
| Common stock, $. par value, shares authorized, and shares issued and outstanding | i 4,759 | i 4,562 | ||||||
| Additional paid-in capital | i 2,846,481 | i 1,469,678 | ||||||
| Accumulated deficit | ( i 1,093,923 | ) | ( i 1,565,579 | ) | ||||
| Total Forge Stockholders’ Equity | i 1,757,317 | ( i 91,339 | ) | |||||
| Noncontrolling interests | i 1,323,000 | - | ||||||
| Total Equity (Deficit) | i 3,080,317 | ( i 91,339 | ) | |||||
| TOTAL LIABILITIES AND EQUITY | $ | i 8,143,109 | $ | i 125,844 | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 2 |
FORGE INNOVATION DEVELOPMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| March 31, 2023 | March 31, 2022 | |||||||
| For the three months ended | ||||||||
| March 31, 2023 | March 31, 2022 | |||||||
| Property management income from related party | $ | i 45,000 | $ | - | ||||
| Property management income | - | i 15,604 | ||||||
| Total revenue | i 45,000 | i 15,604 | ||||||
| Operating expenses | ||||||||
| Professional expenses | i 20,800 | i 9,800 | ||||||
| Selling, general and administrative expenses | i 42,524 | i 36,561 | ||||||
| Total operating expenses | i 63,324 | i 46,361 | ||||||
| Other income | ||||||||
| Other income | i 2,292 | - | ||||||
| Gain on bargain purchase | i 487,688 | - | ||||||
| Total other income | i 489,980 | - | ||||||
| Net income (loss) before tax | i 471,656 | ( i 30,757 | ) | |||||
| Income tax | - | - | ||||||
| Net income (loss) | $ | i 471,656 | $ | ( i 30,757 | ) | |||
| Earning (loss) per common share, basic and diluted | $ | i 0.01 | $ | ( i 0.00 | ) | |||
| Weighted average number of common shares outstanding, basic and diluted | i 45,791,085 | i 45,621,868 | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 3 |
FORGE INNOVATION DEVELOPMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| 2023 | 2022 | |||||||
| For the three months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | i 471,656 | $ | ( i 30,757 | ) | |||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation expense | i 6,213 | i 5,077 | ||||||
| Gain on bargain purchase | ( i 487,688 | ) | - | |||||
| Change in operating assets and liabilities: | ||||||||
| Account receivable | ( i 4,000 | ) | i 4,000 | |||||
| Prepaid expense and other current assets | ( i 2,208 | ) | i 2,500 | |||||
| Other receivable-related party | - | ( i 608 | ) | |||||
| Unearned revenue | ( i 2,292 | ) | - | |||||
| Other current liability – related party | - | ( i 2,196 | ) | |||||
| Accounts payable and accrued liabilities | ( i 22 | ) | ( i 16,596 | ) | ||||
| Net cash used in operating activities | ( i 18,341 | ) | ( i 38,580 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | - | ( i 9,975 | ) | |||||
| Cash acquired from acquiree | i 3,192 | - | ||||||
| Net cash provided by (used in) investing activities | i 3,192 | ( i 9,975 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Repayment of SBA loan and car loans | ( i 2,012 | ) | ( i 20 | ) | ||||
| Advance from a related party | i 14,370 | - | ||||||
| Net cash provided by (used in) financing activities | i 12,358 | ( i 20 | ) | |||||
| Net decrease in Cash | ( i 2,791 | ) | ( i 48,575 | ) | ||||
| Cash at beginning of period: | i 11,734 | i 60,364 | ||||||
| Cash at end of period: | $ | i 8,943 | $ | i 11,789 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFOR | ||||||||
| Interest paid | $ | - | $ | - | ||||
| Income taxes paid | $ | - | $ | - | ||||
| NONCASH TRANSACTION OF INVESTING ACTIVITIES | ||||||||
| Shares issued for acquisition of acquiree | $ | i 1,377,000 | $ | - | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 4 |
FORGE INNOVATION DEVELOPMENT CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Number of Shares | Common Shares | Additional Paid-in Capital | Accumulated Deficit |
Noncontrolling interests | Total Equity | |||||||||||||||||||
Number of Shares | Common Shares | Additional Paid-in Capital | Accumulated Deficit |
Noncontrolling interests | Total Equity | |||||||||||||||||||
| Balance, January 1, 2023 | i 45,621,868 | $ | i 4,562 | $ | i 1,469,678 | $ | ( i 1,565,579 | ) | $ | - | $ | ( i 91,339 | ) | |||||||||||
| Net income | - | - | - | i 471,656 | - | i 471,656 | ||||||||||||||||||
| Acquisition of acquiree | i 1,967,143 | i 197 | i 1,376,803 | - | i 1,323,000 | i 2,700,000 | ||||||||||||||||||
| Balance, March 31, 2023 (unaudited) | i 47,589,011 | $ | i 4,759 | $ | i 2,846,481 | $ | ( i 1,093,923 | ) | i 1,323,000 | $ | i 3,080,317 | |||||||||||||
| Number of Shares | Common Shares | Additional Paid-in Capital | Accumulated Deficit | Total Equity | ||||||||||||||||
| Number of Shares | Common Shares | Additional Paid-in Capital | Accumulated Deficit | Total Equity | ||||||||||||||||
| Balance, December 31, 2021 | i 45,621,868 | $ | i 4,562 | $ | i 1,469,678 | $ | ( i 1,531,467 | ) | $ | ( i 57,227 | ) | |||||||||
| Net loss | - | - | - | ( i 30,757 | ) | ( i 30,757 | ) | |||||||||||||
| Balance, March 31, 2022 (unaudited) | i 45,621,868 | $ | i 4,562 | $ | i 1,469,678 | $ | ( i 1,562,224 | ) | $ | ( i 87,984 | ) | |||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 5 |
Forge Innovation Development Corp. and Subsidiary
Notes to the consolidated financial statements
i
Note 1 - Organization and Description of Business
Forge Innovation Development Corp. (individually “Forge” and collectively with its subsidiary, the “Company”), was initially incorporated in the State of Nevada on January 15, 2016 under the name of You-Go Enterprises, LLC (the “Company Predecessor”). On November 3, 2016, Forge amended its Articles of Incorporation in the State of Nevada to change the Company Predecessor’s name to Forge Innovation Development Corp. Our current principle executive office is located at 6280 Mission Blvd Unit 205, Jurupa Valley, CA 92509. The Company’s main business focuses on real estate development, land purchasing and selling and property management. The Company’s common stock is currently traded on OTCQB under the symbol “FGNV”.
On August 17, 2020, the Company established a wholly owned subsidiary, Forge Network Inc, in the State of California. As of March 31, 2023, we have not generated any income from the subsidiary due to our business strategy adjustment.
On March 24, 2023, pursuant to an Asset Purchase Agreement between Forge and Legend Investment Management, LLC (“Legend LLC” or the “Seller”), the Company acquired i 77.3% of Legend LLC’s i 66% ownership of Legend International Investment, LP (“Legend LP”). Legend LP owns i 100% of Mission Marketplace; a grocery anchored shopping center (the “Property”) located at 6240 Mission Boulevard in Jurupa Valley, California. The Property contains two, one-story and one, two-story buildings containing i 48,722 total square foot of gross leasable area situated on a i 4.51acre site.
A relative of the President of Forge has significant influence of the Seller’s management, therefore the acquisition is being treated as a related party transaction. The Company acquired i 51% interest of Legend LP from Legend LLC in exchanged for common stocks of the Company, valued at $ per share for a total purchase price of $ i 1,377,000. i 51% of Legend LP approximate valued at $ i 2,700,000 based on (1) the Property’s valuation appraisal report dated on February 20, 2023, (2) Legend LP’s net book value as of February 28, 2023, and (3) the loan agreement to Legend LP by a third-party lender effective on March 23, 2023. Upon consummation of the acquisition, the Company owns i 51% of Legend LP and the Seller owns i 15% of Legend LP.
/ i
Note 2 - Summary of Significant Accounting Policies
The accompanying unaudited consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.
| 6 |
i
The preparation of consolidated 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. In the opinion of management, all adjustments necessary in order to make the consolidated financial statements not misleading have been included. Actual results could differ from those estimates.
i
On January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers, using the modified retrospective approach, which applies the new standard to contracts that are not completed as of the date of adoption. Under the new standard, revenue is recognized upon transfer of control of promised goods and services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those goods and services.
Revenue streams that are scoped into ASU 2014-09 include:
Property management services: The Company deals directly with prospects and tenants for the owners of properties, which mainly includes marketing property, collecting rent, handling maintenance, repairing issues and responding to tenant complaints. The Company recognizes revenue as earned on a monthly basis and has concluded this is appropriate under the new standard.
Real estate sales: The Company accounts for the sale of real estate assets and any related gain recognition in accordance with the accounting guidance applicable to sales of real estate, which establishes standards for recognition of profit on all real estate sales transactions, other than retail land sales. The Company recognizes the sale, and associated gain or loss from the disposition, provided that the earnings process is complete, and the Company does not have significant continuing involvement. Subsequent to the adoption of the new standard, the Company may recognize a gain on a real estate disposition that previously did not qualify as a sale or for full profit recognition due to the timing of the transfer of control.
i
We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair values of these identifiable assets and liabilities over the fair value of purchase consideration is recorded as gain on bargain purchase included in other income on the consolidated statement of operations.
i
Non-controlling interests are portions of entities included in the condensed consolidated financial statements that are not attributable to the Company. Non-controlling interests are identified separately from the Company’s stockholders’ equity and its net income (loss). Non-controlling interest equity balances include the non-controlling entity’s initial contribution at the date of the original acquisition, on-going contributions, distributions, and percentage share of earnings since inception. The non-controlling interests are calculated based on percentages of ownership.
| 7 |
i
New Accounting Standards Adopted
In June 2016, the FASB issued ASU No. 2016-13, (Topic 326), Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments which amends the current accounting guidance and requires the use of the new forward-looking “expected loss” model, which requires all expected losses to be determined based on historical experience, current conditions and reasonable and supportable forecasts, rather than the “incurred loss” model. This guidance amends the accounting for credit losses for most financial assets and certain other instruments including trade and other receivables, held-to-maturity debt securities, loans and other instruments. The Company adopted ASU No. 2016-13 on January 1, 2023, which had no impact on the beginning balance of the Company’s balance as there was no receivable balances as of January 1, 2023.
i
Recently Issued Accounting Pronouncements Not Yet Adopted
The management does not believe that other than disclosed above, the recently issued but not yet adopted accounting pronouncements will have a material impact on its financial position results of operations or cash flows.
/ i
The accompanying consolidated financial statements were prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of obligations in the normal course of business. However, the Company has suffered recurring losses from operations since inception, resulting in an accumulated deficit of $ i 1,093,923 as of March 31, 2023. These conditions raise substantial doubt about the ability of the Company to continue as a going concern.
In view of these matters, continuation as a going concern is dependent upon several factors, including the availability of debt or equity funding upon terms and conditions acceptable to the Company and ultimately achieving profitable operations. Management believes that the Company’s business plan provides it with an opportunity to continue as a going concern. However, management cannot provide assurance that the Company will meet its objectives and be able to continue in operation.
The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of Forge Innovation Development Corp. to continue as a going concern.
/ i
Note 4 – Real Estate Investments
i
Schedule of Real Estate Investments
| March 31, | December 31, | |||||||
|
(Unaudited) | 2022 | |||||||
| Commercial building | $ | i 6,440,713 | $ | - | ||||
| Tenant improvements | i 416,610 | - | ||||||
| Construction in progress | i 504,000 | - | ||||||
| Land | i 527,000 | - | ||||||
| Total real estate investments, at cost | i 7,888,323 | - | ||||||
| Less: accumulated depreciation | - | - | ||||||
| Total real estate investments, net | $ | i 7,888,323 | $ | - | ||||
/ i
The Company has not recognized an income tax benefit for its operating losses generated based on uncertainties concerning its ability to generate taxable income in future periods. The tax benefit for the period presented is offset by a valuation allowance established against deferred tax assets arising from the net operating losses, the realization of which could not be considered more likely than not. In future periods, tax benefits and related deferred tax assets will be recognized when management considers realization of such amounts to be more likely than not.
| 8 |
For the three months ended March 31, 2023 and 2022, the Company has incurred a net income before tax of $ i 471,656 and net loss before tax of $ i 30,757, respectively. Net operation losses (“NOLs”) can be carried forever based on the 2017 Tax Cuts and Jobs Act. As of March 31, 2023 and December 31, 2022, deferred tax assets resulted from NOLs of approximately $ i 444,567 and $ i 420,873, respectively, which were fully off-set by valuation allowance reserved.
/ i
Note 6 - Related Party Transactions
During the three months ended March 31, 2023 and 2022, Mr. Liang, the Company’s CEO, paid operating expenses on behalf of the Company in the amount of $ i 7,945 and $nil, respectively. As of March 31, 2023 and December 31, 2022, the Company had payable balance to Mr. Liang in the amount of $ and $, respectively.
On January 4, 2021, the Company purchased a vehicle from Patrick Liang, the President of the Company, for daily business operation, in the amount of $, which equaled to the remaining vehicle loan balance with i 7.11% interest rate annum for a period of i 41 months and monthly installment of $ i 558.
On July 15, 2022, the Company traded its Mazda vehicle with Longo Toyota to exchange a 2022 Toyota Mirai. The total purchase price for the 2022 Toyota Mirai is $ i 84,406.12 and the loan amount is $ i 48,295 by deducting the value of the trade-in Mazda vehicle and the rebate from the manufacturer. The monthly installment amount is $ i 671 with i 0% APR and a payment term of 72 months. Along with the transaction, we received a $ i 15,000 Hydrogen subsidy card for the compensation for the purchase of new energy automobile. We recorded the subsidy as prepaid expense and unearned revenue to amortize on a straight-line basis over the estimate useful life of four years started on the purchase date. As a result of the trade-in transaction, $ i 6,874 gain on disposal was recognized during the year ended December 31, 2022. During the three months ended March 31, 2023, the Company made loan payment of $ i 2,012.
As of March 31, 2023 and December 31, 2022, the Company had payable of $ and $, respectively, owing to Speedlight Consulting Services Inc. for consulting services, which was owned by a previous director, appointed in November 2020 and resigned on January 11, 2023. The amount is unsecure, non-interest-bearing and due on demand.
During the three months ended March 31, 2023 and 2022, the Company generated property management income of $ i 45,000 and $nil from Legend LP. Pursuant to the agreement between Legend LP and the Company, the Company manages the properties owned by Legend LP, which is called Mission Marketplace; a grocery anchored shopping center (the “Property”) located at 6240 Mission Boulevard in Jurupa Valley, California. The Property contains two, one-story and one, two-story buildings containing i 48,722 total square foot of gross leasable area situated on a i 4.51 acre site. The original monthly service charge was $ i 5,000 which was amended to $ i 10,000 per month in June 2022 due to Legend LP required additional management services for their properties. On November 17, 2022, the monthly service charge was amended to $ i 15,000 with one year term due to new tenants moving in and additional management services desired. On March 24, 2023, the Company acquired i 51% interest in Legend LP from Legend LLC. Legend LP became a subsidiary of the Company.
As of March 31, 2023, Legend LP had loans payable in the total amount of $ i 658,000, owing to three entities under the control by the Mother of Mr. Liang, the President of the Company. The amount is unsecure, non-interest-bearing and due on demand.
| 9 |
/ i
Note 7 – Commercial and SBA Loans
On July 14, 2020, the Company entered into a loan agreement with the U.S. Small Business Administration (“SBA”), pursuant to which the Company obtained a loan in the amount of $ i 14,000 with the term of i 30 years and interest rate of i 3.75%, payable monthly including principal and interest in the amount $ i 69. As of March 31, 2023 and December 31, 2022, the outstanding loan balances were $ i 12,689 and $ i 12,689, respectively.
Upon acquisition of Legend LP, the Company assumed loans from Legend LP which was payable to a third party in the principal amount of $ i 3,531,200 (the “Existing Loan”). On March 23, 2023, Legend LP used its Property and rental incomes of the Property and refinanced with the same third party in a promissory note (the “Note”), which provided additional funds after paid off the Existing Loan for the renovation of certain suites of the Property and reserve some interest payments, at the interest rate of “The Wall Street Journal Prime Rate” plus i 3.73% per annum. The Note rate shall be reset whenever The Wall Street Journal Prime Rate Changes. The Note was formally signed and completed between Legend LP and the third-party lender on April 5, 2023.
The Company also assumed a loan from a third party in the total amount of $ i 386,091, which is unsecured, non-interest-bearing and due one demand.
/ i
Note 8 – Acquisition of Legend
On March 23, 2023, the Company acquired i 51% of partnership interest of Legend LP from Legend LLC, for issuance of common stocks of the Company, with a total fair value of $ i 1,377,000. Legend LP became a subsidiary of the Company. Legend LP owns i 100% of Mission Marketplace: a grocery anchored shopping center located at 6240 Mission Boulevard in Jurupa Valley, California. The Property contains two, one-story and one, two-story buildings containing i 48,722 total square foot of gross leasable area situated on a i 4.51acre site. Legend LLC is a related party of the President of the Company. A relative of the President of Forge has significant influence of Legend LP, therefore the acquisition has been treated as a business combination between related parties. The assets and liabilities of Legend LP assumed were accounted for by the Company at historical carrying value on the acquisition date.
i
The following table presents the allocation of the consideration transferred to the assets acquired and liabilities assumed based on their fair values.
Schedule of Assets Acquired and Liabilities Fair Values
/
Given the nature of Legend LP’s operations, substantially all revenue and expenses incurred at the beginning of the month. Considering the short period of 7 days from acquisition date to the quarter end, upon agreement with Legend LLC, the Company will start to consolidate the operation results of Legend LP from April 1, 2023.
/ i
On December 8, 2017, the Company entered into a lease agreement with Puente Hills Business Center II, L.P. (“PHBC-II”) for a lease term of i forty-eight months, and which was scheduled to expire on i January 14, 2022, at monthly rent of $ i 4,962, subject to increase. On or about September 29, 2020, the Company vacated the premises. On October 22, 2020, PHBC-II filed a lawsuit against the Company and its guarantor, Mr. Liang. The Company has retained legal counsel to address the matter and the Court has rescheduled the trial date from January 31, 2023 to April 18, 2023, and then again rescheduled to June 14, 2023. No judgment has been rendered as of March 31, 2023, and the case is still in the pre-trial stage. As of March 31, 2023 and December 31, 2022, the Company had $ i 83,070 and $ i 83,070 rent payable toward the lease agreement, respectively
/ i
In accordance with ASC 855, “Subsequent Events”, the Company has evaluated subsequent events through the date of issuance of these unaudited financial statements and no subsequent events were noted except the one disclosed under Note 7.
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Item 2. Management’s Discussion and Analysis and Plan of Operation
This 10−Q contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with the consolidated financial statements and accompanying notes and the other financial information appearing elsewhere in this report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events.
Overview
Forge Innovation Development Corp. is a development stage company and was incorporated in the State of Nevada in January 2016. The Company’s primary objective is commercial and residential land development, including the purchase and sale of real estate, targeting properties primarily in Southern California. We also intend to manage properties we own, and properties owned by unaffiliated third parties. Our activities will include securing acquisition rights to properties, obtaining zoning and other entitlements for the properties, securing financing for purchase of the properties, improving the properties’ infrastructure and amenities and selling the properties to homeowner and commercial owners for restaurants, offices and small businesses.
On August 17, 2020, the Company established a wholly owned subsidiary, Forge Network Inc, in the State of California. As of March 31, 2023, we have not generated any income from the subsidiary due to our business strategy adjustment.
On March 24, 2023, pursuant to an Asset Purchase Agreement between Forge Innovation Development Corp. (the “Company” or the “Buyer”) and Legend Investment Management, LLC (“Legend LLC” or the “Seller”), the Company acquired 77.3% of Legend LLC’s 66% ownership of Legend International Investment, LP (“Legend LP”). Legend LP owns 100% of Mission Marketplace; a grocery anchored shopping center (the “Property”) located at 6240 Mission Boulevard in Jurupa Valley, California. The Property contains two, one-story and one, two-story buildings containing 48,722 total square foot of gross leasable area situated on a 4.51acre site.
A relative of the President of Forge has significant influence of the Seller’s management, therefore the acquisition is being treated as a related party transaction. The Company acquired 51% interest of Legend LP from Legend LLC in exchanged for 1,967,143 common stocks of the Company, valued at $0.70 per share for a total purchase price of $1,377,000, which equals 51% of Legend LP’s approximate net value of $2,700,000 based on (1) the Property’s valuation appraisal report dated on February 20, 2023, (2) Legend LP’s net book value as of February 28, 2023, and (3) the loan agreement to Legend LP by a third-party lender effective on March 23, 2023. After the closing of the acquisition, the Company will own 51% of Legend LP and the Seller will own 15% of Legend LP.
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Results of Operation for the three months ended March 31, 2023 and 2022
For the three months ended March 31, 2023, we had total revenue of $45,000, as compared to $15,604 for the three months ended March 31, 2022, an increase of $29,396 or 188%. The increase was mainly due to the newly signed property management agreement with Legend LP in 2022.
During the three months ended March 31, 2023 and 2022, the Company incurred general and administrative expenses of $42,524 and $36,561, respectively. The increasing was mainly attributable to the increase in legal and audit fees due to the acquisition of Legend LP’s interest occurred in the first quarter of 2023. For the three months ended March 31, 2023, our net income was $471,656. The net loss for the three months ended March 31, 2022 was $30,757. The change was mainly due to the gain on bargain purchase resulting from the acquisition of Legend LP’s interest, compared to the same period last year.
Equity and Capital Resources
We have incurred losses since inception of our business in 2016, except for current quarter, and as of March 31, 2023, we had an accumulated deficit of $1,093,923. As of March 31, 2023, we had cash of $8,943 and a negative working capital of $4,730,984, compared to cash of $11,734 and a negative working capital of $140,204 as of December 31, 2022. The increase in the working capital deficiency was primarily due to cash used to pay for operating expenses and assumed loans from the acquisition of Legend LP’s interest.
Going Concern Assessment
The Company demonstrates adverse conditions that raise substantial doubt about the Company’s ability to continue as a going concern. These adverse conditions are negative financial trends, specifically cash outflow from operating activities, operating losses, accumulated deficit and other adverse key financial ratios.
Management’s plan to alleviate the substantial doubt about the Company’s ability to continue as a going concern include attempting to improve its business profitability, its ability to generate sufficient cash flow from its operations and execute the business plan of the Company in order to meet its operating needs on a timely basis. However, there can be no assurance that these plans and arrangements will be sufficient to fund the Company’s ongoing capital expenditures and other requirements.
The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that the Company cannot continue as a going concern.
Off-Balance Sheet Arrangements
We have no 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 is material to stockholders.
Critical Accounting Policies
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires making estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
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The critical accounting policies are discussed in further detail in the notes to the audited consolidated financial statements appearing elsewhere in this report. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a “small reporting company” we are not required to provide this information under this item pursuant to Regulation S-K.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report on Form 10-Q, our President (principal executive officer) and our Chief Financial Officer performed an evaluation of the effectiveness of and the operation of our disclosure controls and procedures as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act. Based on that evaluation, our President and Chief Financial Officer each concluded that as of the end of the period covered by this report on Form 10-Q, our disclosure controls and procedures were not effective in timely alerting them to material information relating to Forge Innovation Development Corp. required to be included in our Exchange Act filings.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the quarter ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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On December 8, 2017, the Company entered into a lease agreement with Puente Hills Business Center II, L.P. (“PHBC-II”) for a lease term of forty-eight months, and which was scheduled to expire on January 14, 2022, at monthly rent of $4,962, subject to increase. On or about September 29, 2020, the Company vacated the premises. On October 22, 2020, PHBC-II filed a lawsuit against the Company and its guarantor, Mr. Liang. The Company has retained legal counsel to address the matter and the Court has rescheduled the trial date from January 31, 2023 to April 18, 2023, and then again rescheduled to June 14, 2023. No judgment has been rendered as of March 31, 2023, and the case is still in the pre-trial stage.
As a “smaller reporting company”, we are not required to provide this information under this item pursuant to Regulation S-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On March 24, 2023, pursuant to an Asset Purchase Agreement between Forge and Legend Investment Management, LLC (“Legend LLC” or the “Seller”), the Company acquired 77.3% of Legend LLC’s 66% ownership of Legend International Investment, LP (“Legend LP”). Legend LP owns 100% of Mission Marketplace; a grocery anchored shopping center (the “Property”) located at 6240 Mission Boulevard in Jurupa Valley, California. The Property contains two, one-story and one, two-story buildings containing 48,722 total square foot of gross leasable area situated on a 4.51acre site.
A relative of the President of Forge has significant influence of the Seller’s management, therefore the acquisition is being treated as a related party transaction. The Company acquired 51% interest of Legend LP from Legend LLC in exchanged for 1,967,143 common stocks of the Company, valued at $0.70 per share for a total purchase price of $1,377,000. 51% of Legend LP approximate valued at $2,700,000 based on (1) the Property’s valuation appraisal report dated on February 20, 2023, (2) Legend LP’s net book value as of February 28, 2023, and (3) the loan agreement to Legend LP by a third-party lender effective on March 23, 2023. Upon consummation of the acquisition, the Company owns 51% of Legend LP and the Seller owns 15% of Legend LP.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Mine Safety Disclosures.
Not applicable.
None
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(a) Exhibits.
| Exhibit | Item | |
| 31.1* | Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 | |
| 31.2* | Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 | |
| 32.1* | Certification of Chief Executive Officer and Chief Financial Officer 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 (embedded within the Inline XBRL document) |
| 15 |
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| FORGE INNOVATION DEVELOPMENT CORP. | |
| Date: May 15, 2023 | /s/ Patrick Liang |
| Patrick Liang | |
| Chief Executive Officer | |
| Date: May 15, 2023 | /s/ Patrick Liang |
| Patrick Liang | |
| Chief Financial Officer |
| 16 |
EXHIBIT INDEX
| Exhibit | Item | |
| 31.1* | Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 | |
| 31.2* | Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 | |
| 32.1* | Certification of Chief Executive Officer and Chief Financial Officer 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 (embedded within the Inline XBRL document) |
| 17 |
| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 12/31/23 | ||||
| 6/14/23 | ||||
| Filed on: | 5/15/23 | |||
| 5/12/23 | ||||
| 4/18/23 | ||||
| 4/5/23 | ||||
| 4/1/23 | ||||
| For Period end: | 3/31/23 | 10-K | ||
| 3/24/23 | 8-K | |||
| 3/23/23 | ||||
| 2/28/23 | ||||
| 2/20/23 | ||||
| 1/31/23 | ||||
| 1/11/23 | 8-K | |||
| 1/1/23 | ||||
| 12/31/22 | 10-K | |||
| 11/17/22 | ||||
| 7/15/22 | ||||
| 3/31/22 | 10-Q | |||
| 1/14/22 | ||||
| 12/31/21 | 10-K | |||
| 1/4/21 | ||||
| 10/22/20 | ||||
| 9/29/20 | ||||
| 8/17/20 | ||||
| 7/14/20 | ||||
| 1/1/18 | ||||
| 12/8/17 | ||||
| 11/3/16 | ||||
| 1/15/16 | ||||
| List all Filings | ||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 6/16/23 Forge Innovation Dev Corp. S-8 6/16/23 5:207K M2 Compliance LLC/FA |