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Flower Turbines, Inc. – ‘1-SA’ for 6/30/22

On:  Thursday, 9/29/22, at 3:45pm ET   ·   For:  6/30/22   ·   Accession #:  1104659-22-104135

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 9/29/22  Flower Turbines, Inc.             1-SA        6/30/22    2:257K                                   Toppan Merrill/FA

Semi-Annual Report or Special Financial Report   —   Form 1-SA   —   Regulation A

Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 1-SA        Semi-Annual Report or Special Financial Report      HTML    214K 
 2: EX1SA-6 MAT CTRCT  Exhibit 6.6                                  HTML     42K 


‘1-SA’   —   Semi-Annual Report or Special Financial Report

Document Table of Contents

Page (sequential)   (alphabetic) Top
 
11st Page  –  Filing Submission
"Consolidated Balance Sheets
"Consolidated Statements of Operations and Comprehensive Income/(Loss)
"Consolidated Statements of Changes in Stockholders' Equity
"Consolidated Statements of Cash Flows
"Notes to Consolidated Financial Statements
"5-12

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 1-SA

SEM-ANNUAL REPORT PURSUANT TO REGULATION A

 

For the Annual Period Ended June 30, 2022

 

FLOWER TURBINES, INC.

(Exact name of registrant as specified in its charter)

 

Commission File Number: 024-11330

 

Delaware

(State or other jurisdiction of
incorporation or organization)

 

240 Central Ave., IJ

Lawrence, NY. 11559

(Address of principal executive office)

 

516-862-1018

(Registrant’s telephone number, including area code)

 

46-3784856

(I.R.S. Employer Identification No.)

 

 

 

 C: 

 

 

 

In this Special Financial Report, the term “Solutions Vending International,” “we,” or the company refers to Flower Turbines, Inc.

 

This report may contain forward-looking statements and information relating to, among other things, our its business plan and strategy, and its industry. These forward-looking statements are based on the beliefs of, assumptions made by, and information currently available to our management. When used in this report, the words “estimate,” “project,” “believe,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements, which constitute forward looking statements. These statements reflect management’s current views with respect to future events and are subject to risks and uncertainties that could cause the company’s actual results to differ materially from those contained in the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The company does not undertake any obligation to revise or update these forward-looking statements to reflect events or circumstances after such date or to reflect the occurrence of unanticipated events.

 

ITEM 1. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion of our financial condition and results of operations for the six-month period ended June 30, 2022 (the “2022 Interim Period”), and the six-month period ended June 30, 20120 (the “2021 Interim Period”) should be read in conjunction with our unaudited consolidated financial statements and the related notes included in this report.



Overview

 

Our predecessor-in-interest, Flower Turbines, LLC, was formed as a New York limited liability company on September 15, 2013, and converted into Flower Turbines, Inc., a Delaware corporation, on December 27, 2019. Our headquarters are in Lawrence, New York. We develop and manufacture wind turbines.

 

On March 27, 2019, we formed Flower Turbines B.V., a Netherlands company, to sell, install, and develop sustainable energy solutions in the European Union. In January 2020, we extended our business into the electric mobility vertical through Flower Turbines B.V.’s acquisition of a product line of charging stations, which include stationary poles, outdoor benches, and workstations, which can charge electric vehicles and other products such as mobile phones. The charging stations generate power through wind, solar, and grid energy. We intend to outfit these charging stations with our wind turbines.

 

Results of Operation

 

Revenues

 

For the 2022 Interim Period, we had revenues of $268,317, compared to net revenues of $254,559 for the 2021 Interim Period. 

 

Cost of Goods Sold

 

For the 2022 Interim Period, our costs of goods sold was $311,899, compared to $142,570 for the 2021 Interim Period.  The increase in cost of goods sold was primarily attributable to increased sales.

 

Gross Loss

 

For the 2022 Interim Period, our gross loss was $43,582, compared to a gross profit of $111,989 for the 2021 Interim Period. 

 

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Operating Expenses

 

For the 2022 Interim Period, our total operating expenses were $1,347,324, consisting of $9,036 for sales and marketing expenses, and $1,338,288 for general and administrative costs. For the 2021 Interim Period, our operating expenses were $1,086,607, consisting of $7,632 for sales and marketing expenses, $138,998 for research and development, and $939,977 for general and administrative costs. The increase in operating expenses during the 2022 Interim Period, primarily the result of increased general and administrative expenses related to expansion of staff and research and development.

 

Loss from Operations

 

For the 2022 Interim Period, we had an operating loss of $1,390,906, compared to an operating loss of $974,618 for the 2021 Interim Period. 

 

Other Income/Expenses

 

For the 2022 Interim Period, we had total other income and expenses of -47,080, consisting of -$1,985 in interest expense, -$1,324 in other expenses, and -$46,163 in investment losses, compared to other income and expenses of -$2,241 for the 2021 Interim Period. The -$46,163 in investment losses is the result of changes in value of holdings during that period.

 

Net Loss

 

For the 2022 Interim Period, we had a net loss of $1,437,986, compared to a net loss of $976,859 for the 2021 Interim Period. The increase in net loss for the 2022 Interim Period, is primarily a result of increased operating expenses during the 2022 Interim Period related to the expansion of our operations.

  

Liquidity and Capital Resources

 

Since our inception, we have raised over $11,000,000 through various securities offerings, which we have used for operations, including, approximately $2,100,000 from Regulation CF Campaigns, and approximately $8,900,000 through our Regulation A+ offering. As of June 30, 2022, we had total current assets in the amount of $3,933,035 consisting of $220,673 in cash, $27,862 in prepaid expenses, $191,243 in accounts receivables, $155,499 in other assets, $597,407 in inventory and $2,428,392 in investments. As of December 31, 2021, we had total current assets in the amount of $5,164,702 consisting of $2,350,678 in cash, $78,224 in prepaid expenses, $133,151 in accounts receivables, $131,097 in other assets, and $139,230 in inventory. The $2,428,392 in investments represent money market accounts. The substantial decrease in cash as of June 30, 2022, compared to December 31, 2021, is primarily the result of investment in the business and operating expenses while not fund raising.

 

As of June 30, 2022, and excluding any future proceeds raised in our current Regulation A+ offering, we had sufficient operating capital to fund our operations through April 2023.

 

As of June 30, 2022, we had total liabilities in the amount of $427,306 compared to $549,737 in total liabilities as of December 31, 2021

 

We will incur significant additional costs in commercializing our products, including, but not limited to, in production, marketing, sales and customer service, and intend to continue to fund our operations through funds received from this Offering. We may also engage in additional debt and/or equity financings as determined to be necessary. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned development, which could harm our business, financial condition and operating results. Accordingly, our independent auditors report includes a paragraph regarding substantial doubt about our ability to continue as a going concern.

 

Debt

 

In November 2019, Flower Turbines B.V., our subsidiary, entered into an unsecured loan agreement with Rabobank, pursuant to which two installments were advanced having in the aggregate principal amount of $56,135, and which matures in 84 months. This first advance was in the amount of $28,068, bears interest at 7.5% per annum, and requires monthly interest payments for 84 months with a final balloon payment on the maturity date. The second advance was in the amount of $28,067, bears interest at 7.5% per annum, requires interest only payments for the first 24 months, principal and interest payments of $468 for the next 60 months, with a final balloon payment on maturity date. The total unpaid principal balances on the loans were $55,934 as of December 31, 2021.

 

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Plan of Operations

 

Plan of Operations

 

We are investing in the continued growth of our brand and are seeking to hit the following milestones during 2022:

 

·Launch of small and medium sized wind turbines in the United States.
·EU$500,000 in revenue from sales by Flower Turbines B.V., in the European Union.
·US$500,000 in revenue from sales of small turbines in the United States.
·US$1,000,000 in revenue from exports of turbines outside of the United States.

 

The extent to which we will be able to complete the milestones outlined above is dependent upon the success of our marketing efforts and our utilization of cash.

 

Impact of COVID-19

 

We have been materially and adversely affected by the COVID-19 outbreak. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report, and we are monitoring the global situation and its effects on our business, financial condition, liquidity, and operations. If there is a resurgence of the pandemic, it may have a material adverse effect on our results of future operations, financial position, and liquidity.

 

ITEM 2.  OTHER INFORMATION

 

In June 2022, we entered into an Accelerator Master Membership Agreement with Newchip LLC, in connection with which we issued NewChip LLC a warrant to purchase up to $250,000 in common stock based on a valuation to be determined by the next equity financing in the minimum amount of $100,000 (a “Qualified Financing”); which valuation shall be the greater of either (i) a twenty percent (20%) discount of the price per share or (ii) one and a half times (1.5X) the highest discount offered to investors in such Qualified Financing.

 

In November 2021, we entered into an Employment Agreement with Mr. Stoll, which became effective on January 1, 2022. The Employment Agreement has a term of four years, provides for a salary of $12,000 per month, and a bonus equal to 2% of the gross sales generated by us through the end of 2025. The Employment Agreement may be terminated for any reason by us or Mr. Stoll, by providing 30 days advanced written notice.

 

ITEM 3.  FINANCIAL STATEMENTS

 

The accompanying semiannual financial statements are unaudited and have been prepared in accordance with the instructions to Form 1-SA. Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders’ equity in conformity with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included, and all such adjustments are of a normal recurring nature. Operating results for the six months ended June 30, 2022 are not necessarily indicative of the results that can be expected for the year ending December 31, 2022.

 

 C: 

 

 

 

ITEM 4. EXHIBITS

 

EXHIBITS

 

2.1 Certificate of Incorporation (1)
   
2.2 Amendment to Certificate of Incorporation (2)
   
2.3 Bylaws (3)
   
6.1 License Agreement with Dr. Mark Daniel Farb(4)
   
6.2 IP Assignment Agreement (5)
   
6.3 Stock Option Plan (6)
   
6.4 Employment Agreement with Daniel Farb (7)
   
6.5 Quotation Agreement (8)
   
6.6 Employment Agreement with Warren Stoll (9).

 

1. Filed as an exhibit to the Flower Turbines, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11330) and incorporated herein by reference. Available at,
https://www.sec.gov/Archives/edgar/data/1739997/000110465920110299/tm2030939d1_ex2-1.htm.
2. Filed as an exhibit to the Flower Turbines, Inc., 2021 Annual Report on Form 1-K (Commission File No. 024-11330) and incorporated herein by reference. Available at,
https://www.sec.gov/Archives/edgar/data/1739997/000110465922083393/tm2220718d1_ex2-2.htm.
3. Filed as an exhibit to the Flower Turbines, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11330) and incorporated herein by reference. Available at,
https://www.sec.gov/Archives/edgar/data/1739997/000110465920110299/tm2030939d1_ex2-2.htm.
4. Filed as an exhibit to the Flower Turbines, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11330) and incorporated herein by reference. Available at,
https://www.sec.gov/Archives/edgar/data/1739997/000110465920110299/tm2030939d1_ex6-3.htm.
5. Filed as an exhibit to the Flower Turbines, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11330) and incorporated herein by reference. Available at,
https://www.sec.gov/Archives/edgar/data/1739997/000110465920110299/tm2030939d1_ex6-4.htm.
6. Filed as an exhibit to the Flower Turbines, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11330) and incorporated herein by reference. Available at,
https://www.sec.gov/Archives/edgar/data/1739997/000110465920130499/tm2030939d4_ex6-5.htm.
7.  Filed as an exhibit to the Flower Turbines, Inc. Annual Report on Form 1-K (Commission File No. 024-11330) and incorporated herein by reference. Available at,
https://www.sec.gov/Archives/edgar/data/1739997/000110465921068600/tm2116527d1_ex6-7.htm.
8. Filed as an exhibit to the Flower Turbines, Inc. Regulation A Offering Statement Supplement (Commission File No. 024-11330) and incorporated herein by reference. Available at,
https://www.sec.gov/Archives/edgar/data/1739997/000110465921107273/tm2125408d1_ex6-6.htm.
(9) Filed herewith.

 

 C: 

 

 

 

SIGNATURES

 

Pursuant to the requirements of Regulation A, the issuer has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Lawrence , New York, on September 29, 2022.

 

FLOWER TURBINES, INC.

 

By /s/ Mark Daniel Farb  
  Title: Chief Executive Officer, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer and Director  
       
  Dated: September 29, 2022  

 

 C: 

 

 

 

Flower Turbines, Inc.

A Delaware Corporation

 

Consolidated Financial Statements

June 30, 2022 and 2021

 

 C: 

 

 

 

Flower Turbines, Inc.

 

TABLE OF CONTENTS

 

  Page

 

Consolidated Financial Statements as of as of June 30, 2022 (unaudited) and December 31, 2021 (audited) and for the six-month periods ended June 30, 2022 (unaudited) and June 30, 2021 (unaudited) then ended:
   
Consolidated Balance Sheets 1
   
Consolidated Statements of Operations and Comprehensive Income/(Loss) 2
   
Consolidated Statements of Changes in Stockholders’ Equity 3
   
Consolidated Statements of Cash Flows 4
   
Notes to Consolidated Financial Statements 5–12

 

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FLOWER TURBINES, INC.

CONSOLIDATED BALANCE SHEETS

As of June 30, 2022 (unaudited) and December 31, 2021 (audited)

 

   6/30/2022   12/31/2021 
ASSETS          
Current Assets:          
Cash and cash equivalents  $220,673   $2,350,678 
Prepaid expenses   27,862    78,224 
Accounts receivable   191,243    133,151 
Other assets   155,499    131,097 
Inventory   597,407    139,230 
Investments   2,428,392    - 
Due from officer - related party   -    - 
Funds held in escrow   311,959    2,332,322 
Total Current Assets   3,933,035    5,164,702 
           
Non-Current Assets:          
Intangible assets, net   156,112    - 
Property and equipment, net   159,167    40,580 
Total Non-Current Assets   315,279    40,580 
TOTAL ASSETS  $4,248,314   $5,205,282 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Liabilities:          
Current Liabilities:          
Accounts payable  $139,368   $281,651 
Deferred revenue   17,065    146,912 
Accrued expenses   216,786    64,240 
Notes payable - current   3,962    3,676 
Total Current Liabilities   377,181    496,479 
Long-Term Liabilities:          
Notes payable - net of current   50,125    53,258 
Total Long-Term Liabilities   50,125    53,258 
Total Liabilities   427,306    549,737 
           
Stockholders' Equity:          
Common stock, $0.0001 par, 2,500,000 shares authorized, 10,044,710 and 9,971,680 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively.   1,005    998 
Additional paid-in capital   10,728,480    10,223,395 
Accumulated deficit   (6,927,388)   (5,489,402)
Accumulated other comprehensive gain/(loss)   42,673    (55,684)
Stockholders' equity before noncontrolling interest   3,844,770    4,679,307 
Equity attributable to noncontrolling interest   (23,762)   (23,762)
Total Stockholders' Equity   3,821,008    4,655,545 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $4,248,314   $5,205,282 

 

See accompanying notes, which are an integral part of these consolidated financial statements.

 

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FLOWER TURBINES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)

For the six-month periods ended June 30, 2022 (unaudited) and 2021 (unaudited)

 

   6/30/2022   6/30/2021 
Net revenues  $268,317   $254,559 
Cost of net revenues   (311,899)   (142,570)
Gross profit/(loss)   (43,582)   111,989 
           
Operating Expenses:          
General & administrative   1,338,288    939,977 
Sales & marketing   9,036    7,632 
Research and development   -    138,998 
Total Operating Expenses   1,347,324    1,086,607 
Loss from operations   (1,390,906)   (974,618)
           
Other Income/(Expense):          
Interest expense   (1,985)   (2,386)
Interest income   2,392    145 
Other expense   (1,324)   - 
Investment loss   (46,163)   - 
Total Other Income/(Expense)   (47,080)   (2,241)
Provision for income taxes   -    - 
Net loss   (1,437,986)   (976,859)
Less: net loss attributable to noncontrolling interest   -    9,211 
Net loss attributable to Flower Turbines, Inc.   (1,437,986)   (967,648)
Foreign currency translation gain   98,357    3,455 
Other comprehensive loss  $(1,339,629)  $(964,193)
Basic and diluted net loss per share  $(0.14)  $(0.10)
Weighted average shares outstanding - basic and diluted   10,008,195    9,364,110 

 

See accompanying notes, which are an integral part of these consolidated financial statements.

 

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FLOWER TURBINES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the six-month periods ended June 30, 2022 (unaudited) and 2021 (unaudited)

 

   Common Stock           Accumulated
Other
   Total 
   Number of
Shares
   Amount   Additional
Paid-In Capital
   Accumulated
Deficit
   Comprehensive
Gain/(Loss)
   Stockholders'
Equity
 
Balance at July 1, 2021   9,364,110   $940   $5,045,156   $(3,327,622)  $(12,096)  $1,706,378 
Issuance of stock - Regulation CF   487,810    50    5,176,475    -    -    5,176,525 
Offering costs   -    -    (524,841)   -    -    (524,841)
Shares issued in exchange for cash   119,760    8    526,605    -    -    526,613 
Net loss   -    -    -    (2,161,780)   (43,588)   (2,205,368)
Balance at December 31, 2021   9,971,680    998    10,223,395    (5,489,402)   (55,684)   4,679,307 
    -                          
Issuance of stock - Regulation A   73,030    7    511,205    -    -    511,212 
Offering costs   -    -    (6,120)   -    -    (6,120)
Net loss   -    -    -    (1,437,986)   98,357    (1,339,629)
Balance at June 30, 2022   10,044,710   $1,005   $10,728,480   $(6,927,388)  $42,673   $3,844,770 

 

See accompanying notes, which are an integral part of these consolidated financial statements. 

 

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FLOWER TURBINES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six-months period ended June 30, 2022 (unaudited) and 2021 (unaudited)

 

   6/30/2022   6/30/2021 
Cash Flows From Operating Activities          
Net loss  $(1,437,986)  $(967,648)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   10,455    1,704 
Stock option expense   -    45,708 
Loss attributable to noncontrolling interest   -    (9,211)
Changes in operating assets and liabilities:          
(Increase)/Decrease in prepaid expenses   50,362    18,897 
(Increase)/Decrease in other assets   (24,402)   (61,054)
(Increase)/Decrease in inventory   (458,177)   (109,838)
(Increase)/Decrease in accounts receivable   (58,092)   (154,053)
Increase/(Decrease) in accounts payable   (142,283)   16,201 
Increase/(Decrease) in accrued expenses   152,546    26,573 
Increase/(Decrease) in deferred revenue   (129,847)   (50,620)
Net Cash Used In Operating Activities   (2,037,424)   (1,243,341)
           
Cash Flows From Investing Activities          
Purchase of investments   (2,428,392)   - 
Purchase of intangible assets   (162,712)   - 
Purchase of property of equipment   (122,442)   (10,161)
Net Cash Used In Investing Activities   (2,713,546)   (10,161)
           
Cash Flows From Financing Activities          
Repurchase of treasury stock   -    - 
Proceeds from/(payments to) notes payable   (3,857)   (2,901)
Advances to related party   -    - 
Proceeds from SBA Loan   1,000    - 
Proceeds from issuance of stock   2,531,585    2,702,201 
Offering costs   (6,120)   (338,250)
Net Cash Provided By Financing Activities   2,522,608    2,361,050 
           
Cash effects of foreign currency translation loss   98,357    3,455 
           
Net Change In Cash   (2,130,005)   1,111,003 
           
Cash at Beginning of Period   2,350,678    50,251 
Cash at End of Period  $220,673   $1,161,254 
           
Supplemental Disclosure of Cash Flow Information          
Cash paid for interest  $1,985   $2,386 
Cash paid for income taxes  $-   $- 

 

See accompanying notes, which are an integral part of these consolidated financial statements.

 

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FLOWER TURBINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2022 (unaudited) and December 31, 2021 (audited) and for the six-month periods ended June 30, 2022 (unaudited) and June 30, 2021 (unaudited) 

 

NOTE 1: NATURE OF OPERATIONS

 

Flower Turbines, Inc. and subsidiary (collectively the “Company”), is a corporation formed under the laws of Delaware. The Company was originally incorporated as a New York limited liability company on September 25, 2013 under the name Flower Turbines, LLC. The LLC converted to a Delaware corporation on December 26, 2019. The Company develops unique designs for wind turbines. On March 27, 2019 Flower Turbines B.V. (the “Subsidiary”) was formed in the Netherlands. Flower Turbines B.V. is a majority owned subsidiary (96%) of the Company and was formed for the sale, installation, and development of sustainable energy solutions inside and outside of the Netherlands and the northern region of Europe. During 2022, the Company purchased the remaining 4% interest in the subsidiary and is now the sole owner.

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation and Basis for Consolidation

 

The Company prepares consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (GAAP). These consolidated financial statements include all accounts of Flower Turbines, Inc., along with its majority owned subsidiary, Flower Turbines B.V. All transactions and balances between and among the aforementioned companies have been eliminated in consolidating the accounts for consolidated financial statement presentation. The accounting and reporting policies of the Company conform to GAAP. The Company adopted the calendar year as its basis of reporting.

 

Basis of Presentation

 

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (GAAP). The Company has adopted the calendar year as its basis of reporting.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

 

Noncontrolling Interests

 

Noncontrolling interests represents minority owners’ share of net income or losses and equity in the Company’s majority-owned consolidated subsidiary.

 

Cash Equivalents

 

For the purpose of the statement of cash flows, cash equivalents include time deposits, certificate of deposits, and all highly liquid debt instruments with original maturities of three months or less.

 

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No assurance provided

 

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FLOWER TURBINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2022 (unaudited) and December 31, 2021 (audited) and for the six-month periods ended June 30, 2022 (unaudited) and June 30, 2021 (unaudited) 

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are carried at their estimated collectible amounts. Accounts receivable are periodically evaluated for collectability based on past credit history with clients and other factors. Provisions for losses on accounts receivable are determined on the basis of loss experience, known and inherent risk in the account balance, and current economic conditions.  As of June 30, 2022 and December 31, 2021, the Company carried receivables of $191,243 and $133,151, respectively and no allowances against such.

 

Inventory & Shipping and Handling Costs

 

Inventory is stated at the lower of cost or market and accounted for using the specific identification method. The inventory balances as of June 30, 2022, and December 31, 2021 consist of finished goods held for sale.

 

Property and Equipment

 

The Company has a policy to capitalize expenditures with useful lives in excess of one year and costs exceeding $1,000 as property and equipment and depreciates such assets on a straight-line basis over estimated useful lives (5 years). The Company’s property and equipment is assessed annually for indications of impairment. The Company’s property and equipment are recorded at costs of $170,731 and $48,289 and are presented net of accumulated depreciation of $11,564 and $7,709 as of June 30, 2022 and December 31, 2021, respectively. Depreciation expense of $3,855 and $1,704 were recorded for the six-month periods ended June 30, 2022 and 2021, respectively.

 

Deferred Offering Costs

 

The Company complies with the requirement of FASB ASC 340-10-S99-1. Prior to the completion of the offering these costs are capitalized as deferred offering costs on the balance sheet. The deferred offering costs are charged to stockholders’ equity upon the completion of the offering. There were no deferred offerings costs capitalized to the balance sheet as of June 30, 2022 and December 31, 2021, respectively.

 

Fair Value of Financial Instruments

 

Financial Accounting Standards Board (“FASB”) guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:

 

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities.

 

 C: 

No assurance provided

 

-6-

 

 

FLOWER TURBINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2022 (unaudited) and December 31, 2021 (audited) and for the six-month periods ended June 30, 2022 (unaudited) and June 30, 2021 (unaudited) 

 

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active).

 

Level 3 - Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.

 

The carrying amounts reported in the balance sheets approximate their fair value.

 

Concentrations of Credit Risk

 

The Company’s financial instruments that are exposed to concentrations of credit risk consist of its cash. The Company will place its cash and cash equivalents with financial institutions of high credit- worthiness and has a policy to not carry a balance in excess of FDIC insurance limits.

 

Basic Income/(Loss) per Common Share

 

Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net loss available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity.

 

Revenue Recognition

 

ASC Topic 606, “Revenue from Contracts with Customers” establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers.

 

Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements: 1) identify the contract with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to performance obligations in the contract; and 5) recognize revenue as the performance obligation is satisfied.

 

 C: 

No assurance provided

 

-7-

 

 

FLOWER TURBINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2022 (unaudited) and December 31, 2021 (audited) and for the six-month periods ended June 30, 2022 (unaudited) and June 30, 2021 (unaudited) 

 

Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. As a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less.

 

Each product sold to a customer typically represents a distinct performance obligation. The Company satisfies its performance obligation and revenue is recorded at the point in time when products are installed as the Company has determined that this is the point that control transfers to the customer. The Company invoices customers upon delivery of the products, and payments from such customers are due upon invoicing. Revenues are recognized on these arrangements after the units are produced and fulfilled to the customers, and all other revenue recognition criteria are achieved.

 

Research and Development

 

The Company expenses research and development costs when incurred.

 

Advertising Costs

 

The Company’s policy regarding advertising is to expense advertising when incurred.

 

Income Taxes

 

The Company uses the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes.  Under the liability method, deferred taxes are determined based on the temporary differences between the consolidated financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse.  A valuation allowance is recorded when it is unlikely that the deferred tax assets will be realized.

 

The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon its evaluation of the facts, circumstances and information available at the reporting date.  In accordance with ASC 740-10, for those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, our policy is to record the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit will be recognized in the consolidated financial statements. The Company has determined that there are no material uncertain tax positions.

 

The Company accounts for income taxes with the recognition of estimated income taxes payable or refundable on income tax returns for the current period and for the estimated future tax effect attributable to temporary differences and carryforwards.  Measurement of deferred income items is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized in the immediate future.

 

 C: 

No assurance provided

 

-8-

 

 

FLOWER TURBINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2022 (unaudited) and December 31, 2021 (audited) and for the six-month periods ended June 30, 2022 (unaudited) and June 30, 2021 (unaudited) 

 

From its inception until December 26, 2019, at which time the LLC was converted to a corporation, the Company was subject to taxation as a limited liability company, and therefore was treated as a partnership for federal and state income tax purposes with all income tax liabilities and/or benefits of the Company being passed through to the members. As such, no recognition of federal or state income taxes for the Company have been provided for in the accompanying consolidated financial statements during that period.

 

For the period after the December 26, 2019 conversion to a corporation, the Company was taxed as a corporation. The Company estimates it will have a net operating loss carryforward of $2,460,012 as of June 30, 2022. The Company pays federal and New York income taxes at a combined effective rate of approximately 26% and has used this effective rate to derive a net deferred tax asset of $639,603 as of June 30, 2022, resulting from its net operating loss carryforward. Due to uncertainty as to the Company’s ability to generate sufficient taxable income in the future to utilize the net operating loss carryforwards, the Company has recorded a full valuation allowance to reduce the net deferred tax asset to zero. The 2021 tax returns have not yet been filed as of the issuance of these consolidated financial statements. All tax periods since inception remain open to examination by the taxing jurisdictions to which the Company is subject. 

  

Foreign Currency

 

The consolidated financial statements are presented in United States Dollars, (“USD”), which is the reporting currency and the functional currency of the Company’s U.S. operations. The functional currency for the Subsidiary is its local currency. In accordance with ASC 830, Foreign Currency Matters, foreign denominated monetary assets and liabilities are translated to their USD equivalents using foreign exchange rates which prevailed at the balance sheet date. Non-monetary assets and liabilities are translated at exchange rate prevailing at the transaction date. Revenue and expenses were translated at the prevailing rate of exchange at the date of the transaction. Related translation adjustments are reported as a separate component of stockholders’ equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations. At June 30, 2022 and December 31, 2021, the foreign currency translation gain and loss was $98,357 and ($43,588), respectively.

 

NOTE 3: GOING CONCERN

 

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is a business that has not yet generate profits since inception, has sustained losses of $1,339,629 and $964,193 for the six-month periods ended June 30, 2022 and June 30, 2021, respectively, and has negative cash flows from operations for the six-month period ended June 30, 2022 and 2021, respectively and the Company is reliant on continual financing.

 

The Company’s ability to continue as a going concern in the next twelve months is dependent upon its ability to obtain capital financing from investors sufficient to meet current and future obligations and deploy such capital to produce profitable operating results. Management has evaluated these conditions and plans to raise capital as needed to satisfy it liquidity needs through its Regulation Crowdfunding offering in 2022 and increasing its sales. No assurance can be given that the Company will be successful in these efforts. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The balance sheet does not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

 C: 

No assurance provided

 

-9-

 

 

FLOWER TURBINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2022 (unaudited) and December 31, 2021 (audited) and for the six-month periods ended June 30, 2022 (unaudited) and June 30, 2021 (unaudited) 

 

NOTE 4: MEMBERS’/STOCKHOLDERS’ EQUITY

 

Capital Structure

 

The Company was originally incorporated as a New York limited liability company. The membership interests in such and associated members’ equity were applied to stockholders’ equity and the members were issued common stock in the corporation in exchange for their membership interests in the LLC. Upon conversion to a Delaware corporation in December 2019, the Company authorized 2,500,000 shares of common stock at $0.0001 par value. As of June 30, 2022 and December 31, 2021, 10,044,710 and 9,971,680 shares of common stock were issued and outstanding, respectively.

 

Stock and Membership Units

 

In 2022, the Company had raised $511,212 through issuance of its common stock pursuant to an offering under Regulation Crowdfunding, where 73,030 shares were issued at $7.00 per share.

 

In 2021, the Company had raised $8,065,297 through issuance of its common stock pursuant to an offering under Regulation Crowdfunding, where 903,960 shares were issued at $8.92 per share. In 2021, the Company had raised $556,613 through issuance of its common stock, where 119,760 shares were issued at $4.65 per share. As of June 30, 2022 and December 31, 2021, there was $311,959 and $2,332,322 of funds held in escrow, respectively, related to these issuances. Direct offering costs related to its financing activities totaled $6,120 and $338,250 for the periods ended June 30, 2022 and June 30, 2021 , respectively.

 

Flower Turbines B.V. was a party to an Employment Agreement with Mr. Osinga. The employment agreement has a term of one year, which commenced January 1, 2020, and provides for a monthly base salary of €6,000. The Company also agreed that Mr. Osinga shall receive a commission equal to 5% of the total revenue generated in Europe, above €150,000. The Company agreed that if they were able to generate €500,000 or more in revenue in Europe during 2020, the Company shall issue Mr. Osinga an additional number of shares of Flower Turbines B.V. equal to 3% of the outstanding share capital. The employment agreement was terminated in June 2022 and his shares were purchased by the Company.

 

On April 10, 2020, Flower Turbines B.V., initiated a repurchase of all its shares of capital stock owned by PortXL Netherlands B.V., in exchange for €45,000, of which €11,250 was paid prior to the closing, and the remaining balance of €33,750 was paid in three equal installments of €11,250 in 2020.

 

At the time of the repurchase, Mr. Osinga, the Regional Director EU served as a laison for PortXL Netherlands B.V.

 

 C: 

No assurance provided

 

-10-

 

 

FLOWER TURBINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2022 (unaudited) and December 31, 2021 (audited) and for the six-month periods ended June 30, 2022 (unaudited) and June 30, 2021 (unaudited) 

 

Options

 

During the year ended December 31, 2021, the Company issued 800,000 options that had no intrinsic value, and as such, no expense was recorded. 100,000 of those were for Mr. Osinga, who is no longer entitled to them as of June 2022 by leaving the Company.

 

NOTE 6: OPERATING LEASES

 

Effective July 2017, the Company entered into a lease agreement for a car. The lease term commenced July 2017 and is scheduled to expire after 60 months, in June 2022. Monthly lease obligations under the lease are $271 per month. The lease was paid off in 2021.

 

NOTE 7:  LOANS PAYABLE

 

On November 4, 2019 the Subsidiary entered into a loan agreement with a bank for total principal of $56,134. Loan A is for principal of $28,068 and bears interest at 7.5%. The loan requires monthly interest payments for 84 months with a final balloon payment on the maturity date. Loan B is for principal of $28,067, bears interest at a 7.5% fixed rate. The loan requires interest only payments for the first 24 months, followed by principal and interest payments of $468 for the next 60 months, followed by a balloon payment on the last day of the loans. Loans A and B are unsecured. Interest expense for these loans totaled $1,985 and $2,271 for the six-months ended June 30, 2022 and 2021, respectively. Accrued interest payable totaled $0 and $0 for the six-months ended June 30, 2022 and 2021, respectively. Total unpaid principal balance was $54,087 and $56,934 as of June 30, 2022 and 2021, respectively.

 

Future minimum principal payments under the loans are as follows as of June 30:

 

2023    3,962 
2024    4,269 
2025    4,601 
2026    4,905 
2027    5,285 
Therafter    31,065 
Total   $54,087 

 

 C: 

No assurance provided

 

-11-

 

 

FLOWER TURBINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2022 (unaudited) and December 31, 2021 (audited) and for the six-month periods ended June 30, 2022 (unaudited) and June 30, 2021 (unaudited) 

 

NOTE 9: RECENT ACCOUNTING PRONOUNCEMENTS

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires a lessee to recognize a right-of-use asset and a lease liability under most operating leases in its balance sheet. The ASU is effective for annual and interim periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. We are continuing to evaluate the impact of this new standard on our financial reporting and disclosures.

 

Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying consolidated balance sheet. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.

 

NOTE 10: COMMITMENTS, CONTINGENCIES, AND CONCENTRATIONS

 

The Company may be subject to pending legal proceedings and regulatory actions in the ordinary course of business. The results of such proceedings cannot be predicted with certainty, but the Company does not anticipate that the final outcome, if any, arising out of any such matter will have a material adverse effect on its business, financial condition or results of operations. The Company also has unknown impacts from the ongoing COVID-19 pandemic.

 

NOTE 11: SUBSEQUENT EVENTS

 

Management’s Evaluation

 

The Company has evaluated subsequent events through September 26, 2022, the date the consolidated financial statements were available to be issued. Based on the evaluation, no additional material events were identified which require adjustment or disclosure.

 

 C: 

No assurance provided

 

-12-


Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘1-SA’ Filing    Date    Other Filings
12/31/22
Filed on:9/29/22
9/26/22
For Period end:6/30/22
1/1/22
12/31/211-K,  C-AR,  C-AR/A
12/15/21
7/1/21
6/30/211-SA
4/10/20
1/1/20
12/27/19
12/26/19
11/4/19
3/27/19
9/25/13
9/15/13
 List all Filings 


5 Previous Filings that this Filing References

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 7/28/22  Flower Turbines, Inc.             1-K        12/31/21    3:1.1M                                   Toppan Merrill/FA
 8/18/21  Flower Turbines, Inc.             253G2                  2:65K                                    Toppan Merrill/FA
 5/18/21  Flower Turbines, Inc.             1-K/A      12/31/20    4:808K                                   Toppan Merrill/FA
11/30/20  Flower Turbines, Inc.             1-A/A                  4:1.4M                                   Toppan Merrill/FA
 9/30/20  Flower Turbines, Inc.             1-A                   14:1.7M                                   Toppan Merrill/FA
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