CRDV 10-Q/A
Community Redevelopment Inc. (CRDV)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED
OR
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the period from _______ to ________ |
Commission file number:
(Exact name of registrant as specified in its charter)
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
| ||
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Securities registered pursuant to section 12(g) of the Act:
| Common Stock, $0.001 Par Value |
| (Title of class) |
Indicate by check mark whether the registrant (1) has filed all reports required 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 day.
☒
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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).
Yes ☐
(Does not currently apply to the Registrant)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 if the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
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.
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of November 20th, 2023, the registrant had shares of its Common Stock, $0.001 par value, outstanding.
When used in this quarterly report, the terms “Community Redevelopment Inc.” “the Company,” “we,” “our,” and “us” refer to Community Redevelopment Inc.
EXPLANATORY NOTE
This 10-Q Amendment 1 for the period ended September 30, 2023 is being filed solely to file the XBRL component.
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INDEX
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this quarterly report may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements contained in this quarterly report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, the following risks, uncertainties, and other factors:
| · | The implementation of our strategic plans for our business; | |
| · | Our financial performance; | |
| · | Fluctuations in the number of influencers living in our Clubhouses or that we contract with and their number of social media followers; | |
| · | Developments relating to our competitors and our industry, including the impact of government regulation; | |
| · | Estimates of our expenses, future revenues, capital requirements and our needs for additional financing; and | |
| · | Other risks and uncertainties, including those listed under the captions “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” |
Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
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PART I. Financial Information
Item 1. Consolidated Financial Statements
COMMUNITY REDEVELOPMENT INC.
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2023
INDEX
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Community Redevelopment Inc.
Balance Sheet
| As of 09/30/2023 | As of 12/31/2022 | |||||||
| Unaudited | Audited | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Restricted Cash | ||||||||
| Total current assets | ||||||||
| Construction in Progress | ||||||||
| Other Assets | ||||||||
| Other Assets - Good Faith Deposits & Prepaid Expenses | ||||||||
| Other Receivables - Security Deposits | ||||||||
| Investments in Real Estate Interests - Held for Sale | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and shareholders' equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Credit card payable | ||||||||
| Accrued expenses | ||||||||
| Interest Payable | ||||||||
| Notes Payable | ||||||||
| Convertible Notes Payable, net of discount | ||||||||
| Derivatives on Convertible Note | ||||||||
| Advance from customers | ||||||||
| Short Term Loan | ||||||||
| Mortgage on property, current | ||||||||
| Total current liabilities | ||||||||
| Long Term Liabilities | ||||||||
| Mortgage on property | ||||||||
| Total Long term liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders' Equity | ||||||||
| Preferred stock: $ par value, shares authorized, shares and shares issued and outstanding at September 30, 2023 and December 31, 2022 respectively. | ||||||||
| Common stock: $ par value; shares authorized and shares and shares issued and outstanding at September 30, 2023 and December 31, 2022 respectively. | ||||||||
| Additional paid in capital | ||||||||
| Shares Committed to be issued | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders' equity (Deficit) | ( | ) | ( | ) | ||||
| Total liabilities and Stockholders' Equity (Deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Community Redevelopment Inc.
Statement of Operations
(Unaudited)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September, 30, | September, 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of Services | ( | ) | ( | ) | ( | ) | ||||||||||
| Gross Profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| General and Administrative | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest Income | ||||||||||||||||
| Other income | ||||||||||||||||
| Change in the fair value of derivative | ( | ) | ||||||||||||||
| Total other income (Expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from Continuing Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from Discontinued Operations | ( | ) | ||||||||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net (loss) per share attributable to common stockholders, basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average shares outstanding, basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Community Redevelopment Inc
Statement of Stockholders' Equity (Deficit)
Unaudited
| Preferred Stock | Common Stock | Common Stock | Additional | Total | |||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares Committed | Amount | Paid-in Capital | Accumulated Deficit | Stockholders’ Deficit | |||||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
| Issuance of Common Stock for Services | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Issuance of Common Stock for Debt | – | – | |||||||||||||||||||||||||||||||
| Issuance of Common Stock - Under the Merger Agreement | – | – | |||||||||||||||||||||||||||||||
| Issuance of Preferred Stock - Under the Merger Agreement | 1,000,000 | – | – | ||||||||||||||||||||||||||||||
| Net Loss | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, December 31, 2021 | ( | ) | |||||||||||||||||||||||||||||||
| Shares issued for services | – | – | |||||||||||||||||||||||||||||||
| Shares issued for conversion of Loan | – | – | |||||||||||||||||||||||||||||||
| Shares issued for membership interest in real estate | – | – | |||||||||||||||||||||||||||||||
| Shares Cancelled | (1,000,000 | ) | ( | ( | ) | ( | ) | – | ( | ) | ( | ) | |||||||||||||||||||||
| Shares Committed to issue | – | – | |||||||||||||||||||||||||||||||
| Net Loss | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, December 31, 2022 | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Shares issued for conversion of Loan | – | – | |||||||||||||||||||||||||||||||
| Shares issued for services | – | – | |||||||||||||||||||||||||||||||
| Shares Committed to issue | – | – | |||||||||||||||||||||||||||||||
| Net Loss | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Community Redevelopment Inc.
Statement of Cash Flows
(Unaudited)
| For the Quarter Ended 09/30/2023 | For the Quarter Ended 09/30/2022 | |||||||
| Cash flow from Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Loss from discontinued Operations | ||||||||
| Shares Issued for services | ||||||||
| Gain(Loss) on derivative liabilities | ||||||||
| Change In: | ||||||||
| Increase/(Decrease) in Prepaid Expenses | ( | ) | ( | ) | ||||
| Increase/(Decrease) in Accounts Payable | ||||||||
| Increase/(Decrease) in Interest Payable | ||||||||
| Increase/(Decrease) in Other Receivables | ( | ) | ||||||
| Increase/(Decrease) in Advances | ||||||||
| Increase/(Decrease) in Interest Receivable | ( | ) | ||||||
| Increase/(Decrease) in Notes Payable | ||||||||
| Increase/(Decrease) in Accrued expenses | ( | ) | ||||||
| Net cash provided(used) in operating activities | ( | ) | ( | ) | ||||
| Investing Activities | ||||||||
| Increase in investment in capital work in progress | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing Activities | ||||||||
| Proceeds for shares committed | ||||||||
| Proceeds from notes payable | ||||||||
| Loan from shareholders | ||||||||
| Net cash provided in financing activities | ||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and Cash Equivalents at beginning of period | ||||||||
| Cash and Cash Equivalents at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Supplemental disclosure of cash and non-cash financing activities | ||||||||
| Shares issued for Services | $ | $ | ||||||
| Shares issued for conversion of loan | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Community Redevelopment Inc.
Notes to Consolidated Financial Statements
Unaudited
Note 1–Nature of Business
Organization
Community Redevelopment, Inc. was formed on August 16, 2010 as Crosswind Renewable Energy Corp. an Oklahoma corporation and was formally renamed on June 24th, 2020. We are an emerging growth company. We were established to build upon community assets through real estate, financial services and technology. Our experienced team has dedicated their careers to constructing high-quality mixed-use, multifamily residential, and commercial properties in top metropolitan regions as well as have deep roots in technology and finance industries. Our vision is to integrate our real estate development proprietary business model across multiple verticals in finance, technology, and real estate. This will provide long-term value to investors while staying true to our mission of enhancing communities.
Emerging Growth Company
The Company is an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of section 404(b) of the Sarbanes-Oxley Act, and exemptions from the requirements of Sections 14A(a) and (b) of the Securities Exchange Act of 1934 to hold a nonbinding advisory vote of stockholders on executive compensation and any golden parachute payments not previously approved.
The Company has elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.
We will remain an “emerging growth company” for up to five years, although we will lose that status sooner if our revenues exceed $1.07 billion, if we issue more than $1 billion in non-convertible debt in a three-year period, or if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the end of the second quarter of any fiscal year following the anniversary of the initial reporting.
To the extent that we continue to qualify as a “smaller reporting company”, as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, after we cease to qualify as an emerging growth company, certain of the exemptions available to us as an emerging growth company may continue to be available to us as a smaller reporting company, including: (1) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act; (2) scaled executive compensation disclosures; and (3) the requirement to provide only two years of audited financial statements, instead of three years.
Note 2 - Significant Accounting Policies
Basis of Presentation
These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented.
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Use of Estimates
In preparing the consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions made by management include, but are not limited to, revenue recognition, the allowance for bad debt, useful life of fixed assets, income taxes and unrecognized tax benefits, valuation allowance for deferred tax assets, and assumptions used in assessing impairment of long-lived assets. Actual results could differ from those estimates.
The COVID-19 pandemic has caused uncertainty and disruption in the global economy and financial markets. As a result, management’s estimates and assumptions may be subject to a higher degree of variability and volatility that may result in material differences from the current period.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with maturities of three months or less when purchased. Cash and cash equivalents are on deposit with financial institutions without any restrictions.
Concentrations of Credit Risk and Off-Balance Sheet Arrangements
Cash is a financial instrument that potentially subjects the Company to concentrations of credit risk. For all periods presented, substantially all of the Company’s cash was deposited in an account at a single financial institution that management believes is creditworthy. The Company is exposed to credit risk in the event of default by these financial institutions for amounts in excess of the Federal Deposit Insurance Corporation insured limits. The Company maintains its cash at a high-quality financial institution and has not incurred any losses to date.
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 investors.
Fair Value of Financial Instruments
The carrying value of cash, accounts receivable, other receivable, note receivable, other current assets, accounts payable, and accrued expenses, if applicable, approximate their fair values based on the short-term maturity of these instruments. The carrying amounts of debt were also estimated to approximate fair value.
The Company utilizes the methods of fair value (“FV”) measurement as described in ASC 820 to value its financial assets and liabilities. As defined in ASC 820, FV is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in FV measurements, ASC 820 establishes a FV hierarchy that prioritizes observable and unobservable inputs used to measure FV into three broad levels, which are described below:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange.
Level 2 – Pricing inputs are other than quoted prices in active markets but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs.
Level 3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights.
Our financial instruments consist of our accounts payable, accrued expenses - related party and loan payable – related party. The carrying amount of our prepaid accounts payable, accrued expenses- related parties and loan payable – related party approximates their fair values because of the short-term maturities of these instruments.
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Investments
A non-controlling, unconsolidated ownership interest in an entity may be accounted for using one of: (i) equity method where applicable; (ii) fair value option if elected; (iii) fair value through earnings if fair value is readily determinable, including election of net asset value (“NAV”) practical expedient where applicable; or (iv) for equity investments without readily determinable fair values, the measurement alternative to measuring at cost adjusted for any impairment and observable price changes, as applicable.
Changes in fair value of equity method investments are recorded in realized and unrealized gains (losses) in the condensed combined and consolidated statements of operations.
Derivative liabilities
The Company identified the conversion feature of convertible notes payable as derivatives.
We estimate the fair value of the derivatives using multinomial lattice models that value the derivative liabilities based on a probability-weighted cash flow model using projections of the various potential outcomes. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility and management’s estimates of various potential equity financing transactions. These inputs are subject to significant changes from period to period and to management's judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.
Fair value of financial instruments
Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, and ASC 825, Financial Instruments, the FASB establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company's consolidated financial statements as reflected herein. The carrying amounts of cash, prepaid expense and other current assets, accounts payable, accrued expenses and notes payable reported on the accompanying consolidated balance sheets are estimated by management to approximate fair value primarily due to the short-term nature of the instruments.
An entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value using a hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy prioritized the inputs into three levels that may be used to measure fair value:
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in markets that are not active.
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
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Our derivative liabilities are measured at fair value on a recurring basis and estimated as follows:
| Schedule of derivative liabilities at fair value | ||||||||||||||||
| September 30, 2023 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
| Derivative liabilities | $ | $ | $ | $ | ||||||||||||
| December 31, 2022 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
| Derivative liabilities | $ | $ | $ | $ | ||||||||||||
Non-controlling Interests
Non-controlling interests represent the share of consolidated entities owned by third parties. Community Redevelopment recognizes each non-controlling ownership at the estimated fair value of the net assets at the date of formation or acquisition.
Related Parties
The Company follows subtopic 850-10 of the FASB ASC for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 related parties include:
a. affiliates of the Company;
b. entities for which investments in their equity securities would be required, absent the election of the FV option under the FV Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity;
c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management;
d. principal owners of the Company;
e. management of the Company;
f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and
g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements shall include disclosures of material-related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of financial statements is not required in those statements.
The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
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Revenue Recognition
In May 2014 the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes all existing revenue recognition requirements, including most industry specific guidance. This new standard requires a company to recognize revenues when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. The FASB subsequently issued the following amendments to ASU No. 2014-09 that have the same effective date and transition date: ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations; ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing; ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients; and ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The Company adopted these amendments with ASU 2014-09 (collectively, the new revenue standards).
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:
Step 1: Identify the contract(s) with customers
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to performance obligations
Step 5: Recognize revenue when the entity satisfies a performance obligation
Service revenues are recognized as the services are performed in proportion to the transfer of control to the customer and real estate revenues are recognized at the time of sale when consideration has been exchanged and the title has been conveyed to the buyer. At this time, we have not identified specific planned revenue streams.
Under the provisions of ASC 260, “Earnings per Share,” basic loss per common share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the income of the Company, subject to anti-dilution limitations.
| Schedule of earnings per share | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| Numerator: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Weighted average common shares outstanding—basic | ||||||||
| Dilutive common stock equivalents | ||||||||
| Weighted average common shares outstanding—diluted | ||||||||
| Net loss per share: | ||||||||
| Basic | $ | ( | ) | $ | ( | ) | ||
| Diluted | $ | ( | ) | $ | ( | ) | ||
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Realized and Unrealized Gains (Losses)
Realized gains (losses) occur when the Company redeems all or a portion of its investment or when the Company receives cash income, such as dividends or distributions. Unrealized appreciation (depreciation) results from changes in the fair value of the underlying investment as well as from the reversal of previously recognized unrealized appreciation (depreciation) at the time an investment is realized. Realized and unrealized gains (losses) are presented together as realized and unrealized gains (losses) in the condensed combined and consolidated statements of operations.
Income Taxes
The Company accounts for income taxes using the asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in the tax law. For deferred tax assets, management evaluates the probability of realizing the future benefits of such assets. The Company establishes valuation allowances for its deferred tax assets when evidence suggests it is unlikely that the assets will be fully realized.
The Company recognizes the tax effects of an uncertain tax position only if it is more likely than not to be sustained based solely on its technical merits as of the reporting date and then only in an amount more likely than not to be sustained upon review by the tax authorities. Income tax positions that previously failed to meet the more likely than not threshold is recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more likely than not threshold is derecognized in the first subsequent financial reporting period in which that threshold is no longer met. The Company classifies potential accrued interest and penalties related to unrecognized tax benefits within the accompanying consolidated statements of operations and comprehensive income (loss) as income tax expense.
Comprehensive Income
Other comprehensive income consists of net income and other appreciation (depreciation) affecting the Company that, under GAAP, are excluded from net income.
New Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including those interim periods within those fiscal years. We did not expect the adoption of this guidance have a material impact on its consolidated financial statements.
Note 3 - Going Concern
The accompanying unaudited 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 has accumulated loss of $
The ability of the Company to continue as a going concern is dependent upon its abilities to generate revenues, to continue to raise investment capital, and develop and implement its business plan. No assurance can be given that the Company will be successful in these efforts.
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Note 4 – Authorized Shares
The Company is authorized to issue up to shares of common stock, par value $ per share. Each outstanding share of common stock entitles the holder to one vote per share on all matters submitted to a stockholder vote. All shares of common stock are non-assessable and non-cumulative, with no pre-emptive rights.
Additionally, The Company has (Five Million) shares of preferred stock, with conversion rights of 1:1 (one to one), but with 30:1 voting rights.
As part of the corporate restructuring in specific preparation for this merger, on September 15th, 2021, the Company Reduced its Authorized shares from 3 billion to five hundred million and created the above-referenced Preferred Class with 1:1 conversion and 30:1 voting rights.
During the Three months ending September 30, 2023, shares of common and shares of preferred were issued and outstanding.
Note 5 - Construction In progress - Real Estate Properties
On September 20th, 2021, the Company entered into a Merger Agreement with Red Hills Capital Advisors, LLC, by which the Community Redevelopment Inc (the Company) acquired a portfolio of membership interests in development of six commercial retail, multifamily and mixed-use properties, in the Washington, DC Metro area. The Equity interest of RedHills Capital Advisors, in these properties amounted to $18,471,239. The Consideration for this transaction on the part of the Company was the issuance of 17,750,000 common shares and 1 million Preferred shares with 1:1 conversion, and 30:1 voting rights.
On June 28th, 2022, as part of restructuring plan in an effort to reorient the company assets, the Company came to the conclusion that the Company’s expectations regarding infusion of available financing had not materialized, to the harm of Community Redevelopment Inc., and that further attempted continuation of said Agreement was of no value and in fact detrimental to the overall financial condition of the Company. As such, management made the decision to Rescind the September 21st, 2021 Agreement with Red Hills placing these interests into our Company.
As such, by the Rescission Agreement removing Red Hills as part of the Company, the above-listed assets were removed from the company as part of this first phase of restructuring during this third Quarter of 2022. As it was a Rescission, all 18.5 million shares issued to Red Hills as consideration for these removed assets are to be returned to the Treasury of the Company, placing each side exactly as they were just prior to said Agreement.
On September 30th, 2022, the Company, through one of its subsidiaries, acquired 100% interest in “1000 18th St, NE 2020, LLC.” The purchase price for this acquisition was $379,691, which was exchanged for shares. The property held within the acquired LLC is a 10-unit multifamily residence currently under development. We accounted for the acquisition as an asset acquisition. We measured the value of the acquired physical assets (restricted cash, prepaid insurance, land, and building) and the liabilities assumed (Mortgages, net) by allocating the total cost of the acquisition on a relative fair value basis.
On September 30th, 2022, the Company, through
one of its subsidiaries, acquired 100% interest in “1320 8th St Fund LLC, the titled holder to 1320 8th St NW, Washington, DC.”
The purchase price for this acquisition was $
On April 1st, 2023, the Company acquired a property 1618 21st Place NE Washington, DC. The property is located at 1618 21st Place with a designed total of 15 units and includes: three 3-bedroom, eight 2-bedroom, four 1-bedroom units. The property is nearing the end of the construction process with anticipated completion by the end of 2023.
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We have recorded the Construction In progress details of the Properties as follows:
| Schedule of construction in progress | ||||
| Property Name | 9/30/2023 | |||
| 1000 18th Street | ||||
| 1320 8th Street | ||||
| 1618 21st Place | ||||
| Total | $ | |||
The company continues to review and may adjust the purchase price allocations during the one-year window.
The primary operation for these transactions is retail stores, apartment buildings, and centers which are either owned or held under long-term operating leases. The Company holds noncontrolling interests in these ventures and accounts for them under the equity method of accounting.
Note 6 - Notes Payable
On April 8th, 2021, the Company executed a Senior
Secured Convertible Promissory Note, Securities Purchase Agreement, and ancillary agreements (collectively, the “Agreements”)
with Leonite Capital, LLC Per the terms of the Agreements with Leonite Capital, LLC, the Company borrowed the maximum of $
Convertible notes payable, consist of the following at September 30, 2023:
| 9/30/2023 | 12/31/2022 | |||||||
| Note payable to an unrelated party, matured April 8, 2022, with interest at 10%, convertible into common shares of the Company | $ | $ | ||||||
| Note payable to an unrelated party, matured September 20, 2022, with interest at 10%, convertible into common shares of the Company | ||||||||
| Total | $ | $ | ||||||
Note 7: Short Term Loan
On November 30th, 2021, the Company executed
a short-term loan of $
Per the terms of the Agreements with NextBank International, Inc, the Company may borrow up to $1,000,000, which is open with the right of redemption for one year against the collateral of 1,500,000 shares of CRDV stock.
The Private Note has a 7.5% fixed rate that matures on November 30, 2022. As of September 30, 2022, the company has withdrawn the full amount net of the loan less the loan fees.
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On September 30th, 2022 NextBank International,
Inc, has entered into an agreement whereby it will convert the outstanding balance for shares at a strike price of $0.05, not to exceed 4.9%
of the then issued and outstanding shares of the Company. On September 30, 2022, 1,420,700 shares have been committed to be
converted in exchange for $71,035 of the outstanding balance and these shares were issued to Next Bank on October 4th, 2022. On January
23, 2023, shares have been converted in exchange for $
The Company entered into a 1 year Convertible Promissory Note for $500,000 with TomorrowPay LLC on July 31st, 2023. On September 11th, 2023, TomorrowPay LLC converted $50,000 of their Note into 2,777,777 common shares.
Note 8: Derivative Financial Instruments
The Company is exposed to certain risks arising from both business operations and economic conditions, including interest rate risk. To mitigate the impact of interest rate, the Company enters into derivative financial instruments. The Company maintains the majority of its overall interest rate exposure on floating rate borrowings to a fixed-rate basis.
Derivative Instruments
The fair value of interest rate swaps is included within Other non-current liabilities in the Consolidated Balance Sheets. The Company does not net derivatives in the Consolidated Balance Sheets.
Note 9 – Commitments & Contingencies
On April 8th, 2021, the Company executed a Senior Secured Convertible Promissory Note, Securities Purchase Agreement and ancillary agreements (collectively, the “Agreements”) with Leonite Capital, LLC Per the terms of the Agreements with Leonite Capital, LLC, the Company may borrow up to $500,000; of which $500,000 was tendered, which is open with right of redemption for one year. As of September 13th, 2022, the Company has been deemed to be in default of said Note, and Leonite has given notice of its intent to enforce a UCC lien.
We will require additional financing to implement our business plan, which may include joint venture projects and debt or equity financings. The nature of this enterprise and constraint of positive cash flow places debt financing beyond the credit-worthiness required by most banks or typical investors of corporate debt until such time as an economically viable profits and losses can be demonstrated. Therefore, any debt financing of our activities may be costly and result in substantial dilution to our stockholders.
Future financing through equity investments is likely to be dilutive to existing stockholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for our new investors. Newly issued securities may include preferences, superior voting rights, and the issuance of warrants or other derivative securities, which may have additional dilutive effects. Further, we may incur substantial costs in pursuing future capital and financing, including investment banking fees, legal fees, accounting fees, and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition.
Our ability to obtain needed financing may be impaired by such factors as the capital markets, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities, together with our revenue from operations, is not sufficient to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to cease operations.
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There is no assurance that we will be able to obtain financing on terms satisfactory to us, or at all. We do not have any arrangements in place for any future financing. If we are unable to secure additional funding, we may cease or suspend operations. We have no plans, arrangements or contingencies in place in the event that we cease operations.
The Company’s guarantees primarily relate to requirements under certain financial obligations and some contracts and have arisen through the normal course of business. These guarantees, with certain financial institutions, have both open and closed-ended terms; with remaining closed-ended terms up to 1.0 years and maximum potential future payments of approximately $1 million in the aggregate.
Note 10 - Related Party
Mr. Richard Balles Director of the company is also holding a position as the Vice President in NextBank International.
Note 11 – Subsequent Events
The Company has evaluated subsequent events through November 20th, 2023, the date on which these financial statements were issued, and has determined there are no material subsequent events to disclose.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Special Note Regarding Forward-Looking Statements
THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT REFLECT OUR PLANS, ESTIMATES AND BELIEFS. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED BELOW AND ELSEWHERE IN THIS QUARTERLY REPORT.
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other Federal securities laws and is subject to the safe-harbor created by such Act and laws. Forward-looking statements may include statements regarding our goals, beliefs, strategies, objectives, plans, including product and technology developments, future financial conditions, results or projections or current expectations. These forward-looking statements involve known or unknown risks, uncertainties and other factors that may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. These statements are based on our current beliefs, expectations, and assumptions and are subject to a number of risks and uncertainties. Although we believe that the expectations reflected-in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Our actual results may differ materially from those anticipated in these forward-looking statements. These forward-looking statements are made as of the date of this report, and we assume no obligation to update these forward-looking statements whether as a result of new information, future events, or otherwise, other than as required by law. In light of these assumptions, risks, and uncertainties, the forward-looking events discussed in this report might not occur and actual results and events may vary significantly from those discussed in the forward-looking statements.
Implications of Being an Emerging Growth Company
We are an Emerging Growth Company as defined in Section 2(a)(19) of the Securities Act of 1933, as amended, or the Securities Act. We will continue to be an emerging growth company until: (i) the last day of our fiscal year during which we had total annual gross revenues of at least $1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act; (iii) the date on which we have, during the previous 3-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a large accelerated filer, as defined in Section 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior September 30.
As an emerging growth company, we are exempt from:
| · | Sections 14A(a) and (b) of the Exchange Act, which require companies to hold stockholder advisory votes on executive compensation and golden parachute compensation. | |
| · | The requirement to provide, in any registration statement, periodic report or other reports to be filed with the Securities and Exchange Commission, or the “Commission” or “SEC”, certain modified executive compensation disclosure under Item 402 of Regulation S-K or selected financial data under Item 301 of Regulation S-K for any period before the earliest audited period presented in our initial registration statement. | |
| · | Compliance with new or revised accounting standards until those standards are applicable to private companies; | |
| · | The requirement under Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, to provide auditor attestation of our internal controls and procedures; and | |
| · | Any Public Company Accounting Oversight Board, or “PCAOB”, rules regarding mandatory audit firm rotation or an expanded auditor report, and any other PCAOB rules subsequently adopted unless the Commission determines the new rules are necessary for protecting the public. |
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We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the Jumpstart Our Business Startups Act.
We are also a smaller reporting company as defined in Rule 12b-2 of the Exchange Act. As a smaller reporting company, we are not required to provide selected financial data pursuant to Item 301 of Regulation S-K, nor are we required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002. We are also permitted to provide certain modified executive compensation disclosure under Item 402 of Regulation S-K.
Company Overview
Community Redevelopment, Inc. was formed on August 16, 2010, as Crosswind Renewable Energy Corp. an Oklahoma corporation and was formally renamed as Community Redevelopment Inc. on June 24th, 2020. We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). We were established to build upon community assets through real estate, financial services and technology. Our experienced team has dedicated their careers to constructing high-quality mixed-use, multifamily residential, and commercial properties in top metropolitan regions as well as have deep roots in technology and finance industries. Our vision is to integrate our real estate development proprietary business model across multiple verticals in finance, technology, and real estate. This will provide long-term value to investors while staying true to our mission of enhancing communities.
Our focus is to invest primarily in real estate, technology and finance opportunities in the United States. Our board of directors will at all times have oversight and policy-making authority over us, including responsibility for governance, financial controls, compliance and disclosure.
On September 20, 2021, the Company executed a Merger Agreement with Red Hills Capital Advisors, LLC, by which the Company has now acquired a portfolio of membership interests in six commercial, retail, multifamily and mixed-use properties, in revitalized areas in the Washington, DC Metro area. All the properties were both partially occupied and under continued development.
On June 28th, 2022, as part of restructuring plan in an effort to reorient the company assets, the Company came to the conclusion that the Company’s expectations regarding infusion of available financing had not materialized, to the harm of Community Redevelopment Inc., and that further attempted continuation of said Agreement with Red Hills Capital Advisors LLC was of no value and in fact detrimental to the overall financial condition of the Company. As such, management made the decision to Rescind the September 21st, 2021 Agreement with Red Hills placing these interests into our Company.
As such, by the Rescission Agreement removing Red Hills as part of the Company, the above-listed assets were removed from the company as part of this first phase of restructuring during this third Quarter of 2022. As it was a Rescission, all 18.5 million shares issued to Red Hills as consideration for these removed assets were returned to the Treasury of the Company, placing each side exactly as they were just prior to said Agreement.
On September 30th, 2022, the Company, through one of its subsidiaries, acquired 100% interest in “1000 18th St, NE 2020, LLC.”, the titled holder of the real property 1000 18th St NE, Washington, DC. The purchase price for this acquisition was $379,691, which was exchanged for 6,328,181 common shares of the Company. The property held within the acquired LLC is a 10-unit multifamily residence currently under development. We accounted for the acquisition as an asset acquisition. We measured the value of the acquired physical assets (restricted cash, prepaid insurance, land, and building) and the liabilities assumed (Mortgages, net) by allocating the total cost of the acquisition on a relative fair value basis.
On September 30th, 2022, the Company, through one of its subsidiaries, acquired 100% interest in “1320 8th St Fund LLC.”, the titled holder of the real property 1320 8th St NW, Washington, DC. The purchase price for this acquisition was $583,128, which was exchanged for 9,718,808 shares. The property held within the acquired LLC is a 10-unit multifamily residence currently under development. We accounted for the acquisition as an asset acquisition. We measured the value of the acquired physical assets (restricted cash, prepaid insurance, land, and building) and the liabilities assumed (Mortgages, net) by allocating the total cost of the acquisition on a relative fair value basis.
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Community Redevelopment can help impact economic mobility by focusing on partnerships between the public and private sector to generate both business interest and business activity in low-income neighborhoods that have gone unnoticed by the development community at large while repairing and mending relationships in these underserved communities. Our Company intends to work with other real estate developers, as well as local and state government agencies to implement the community’s vision for our projects. We are confident in our ability to deliver community-centric projects because we have built a team that understands the challenges facing underserved communities from living and working in them.
Our Company is graciously endowed with an expert management team that has extensive experience in acquiring, developing, constructing, and managing high-quality multifamily, and retail properties in attractive markets throughout the Mid-Atlantic United States. The Company is focused on all aspects of the real estate development cycle including land development, design-build, property operations, and site redevelopment. In addition to the ownership of our operating property portfolio, Community Redevelopment plans to develop and build desirable properties for its own account and through ventures with affiliated and unaffiliated partners.
Community Redevelopment, Inc. is focused on community development in urban and suburban markets and our mission is to integrate our proprietary business model by providing sustainable, long-term value to investors as we strive to provide opportunities to improve neighborhoods with residential, commercial, and industrial development projects while designing architecturally pleasing, clean, energy-efficient communities and commercial structures.
Properties Acquired by the Red Hills Capital Advisors LLC.
As of September 20, 2021, we acquired membership interests in advance in real estate. The Consideration for this transaction on the part of the Company was the issuance of 17,750,000 common shares and 1,000,000 Preferred shares with 1:1 conversion, and 30:1 voting ratio. The stock value of the investment is $18,471,239.
On June 28th, 2022, as part of restructuring plan in an effort to reorient the company assets, the Company came to the conclusion that the Company’s expectations regarding infusion of available financing had not materialized, to the harm of Community Redevelopment Inc., and that further attempted continuation of said Agreement was of no value and in fact detrimental to the overall financial condition of the Company. As such, management made the decision to Rescind the September 21st, 2021 Agreement with Red Hills placing these interests into our Company.
As such, by the Rescission Agreement removing Red Hills as part of the Company, the above-listed assets were removed from the company as part of this first phase of restructuring during this third Quarter of 2022. As it was a Rescission, all 18.5 million shares issued to Red Hills as consideration for these removed assets are to be returned to the Treasury of the Company, placing each side in a state of equipoise exactly as they were just prior to said Agreement.
Community Redevelopment owns membership interests in multiple properties in the Washington DC metropolitan region, which are comprised of retail, multifamily, and mixed-use development projects. Our acquisition strategy is based on acquiring quality, well-positioned real estate in markets with robust growth and demographics, anchored by strong tenants. The Washington D.C. metropolitan area remains strong as a result of increased government spending. These properties are located in a market that is thriving and generating robust job growth with significant demand for housing.
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Community Redevelopment Inc. is currently seeking additional opportunities in the Washington DC real estate market. Community Redevelopment's acquisition strategy is based on acquiring quality, well-positioned real estate in markets with robust growth and demographics, anchored by strong tenants. Our aim is to approach acquisition and development thoughtfully by developing and acquiring high-quality, well-located projects at cost, for its stabilized portfolio or to sell with full market value-added for a profit. The Company may also partner with other developers to build or acquire fractional or membership interests in economically viable projects. Community Redevelopment’s business model creates a tremendous advantage in the marketplace while providing long-term value. Our ability to acquire and develop single and multi-family rental properties that can either be held by us or sold to regional and national companies, further strengthens our market standing. We believe our strategy of working with federal, state, and local governments, as well as community leaders and other developers in our principal geographic areas and our targeted areas for expansion, will provide us with a diverse product portfolio and an opportunity to increase our overall market share and value.
During this 1st Quarter, the Company committed to acquire a 41 unit building currently under construction in Washington, DC. Colliers International has independently appraised this property as having a $15.9 million “as is” value and a $19.9 “upon completion” value. This transaction is expected to close within the 2nd or 3rd Quarter of 2023.
Community Redevelopment owns and is in the process of acquiring multiple properties in the Washington DC metropolitan region, which are comprised of retail, multifamily, and mixed-use development projects. Our acquisition strategy is based on acquiring quality, well-positioned real estate in markets with robust growth and demographics, anchored by strong tenants. The Washington D.C. metropolitan area remains strong as a result of increased government spending. These properties are located in a market that is thriving and generating robust job growth with significant demand for housing.
We anticipate acquiring several properties within the next quarter. Community Redevelopment's acquisition strategy is based on acquiring quality, well-positioned real estate in markets with robust growth and demographics, anchored by strong tenants. Our aim is to approach acquisition and development thoughtfully by developing and constructing high-quality, well-located projects at cost, for its stabilized portfolio or to sell with full market value-added for a profit. The Company also plans to partner with other developers to build or acquire fractional or membership interests in economically viable projects. Community Redevelopment’s business model creates a tremendous advantage in the marketplace while providing long-term value. Our ability to acquire and develop single and multi-family rental properties that can either be held by us or sold to regional and national companies, further strengthens our market standing. We believe our strategy of working with federal, state, and local governments, as well as community leaders and other developers in our principal geographic areas and our targeted areas for expansion, will provide us with a diverse product portfolio and an opportunity to increase our overall market share and value.
Community Redevelopment, Inc. is not an opportunity zone fund or a real estate investment trust. Community Redevelopment, Inc. is a real estate developer offering potential investors an opportunity to participate in the process of investing in real estate projects that could improve the quality of life for residents of low-income neighborhoods, via a publicly traded company. The Company intends to work with other real estate developers, as well as local and state government agencies to complete its projects in these communities.
Community Redevelopment, Inc. operates as a community-oriented real estate redeveloper targeting economic growth and opportunity zones in secondary and tertiary value-added markets. The Company is primarily focused on opportunity zones in an effort to bring commerce and affordable housing to underserved areas. Community Redevelopment plans to provide numerous opportunities to improve low-income neighborhoods for residential, commercial, and industrial opportunities through government incentives, long-term partnerships, and agreements. Our mission is to rebuild depressed, underserved communities, improve the quality of life in those markets, and provide our investors with an opportunity to profit. We intend to accomplish this by focusing on partnerships between the public and private sector to generate both business interest and business activity in low-income neighborhoods that have gone unnoticed by the development community at large while repairing and mending relationships in these underserved communities.
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The Company is not a “shell company,” since its filing of its Form 10 with the SEC on January 19, 2021, as it has formal operations, emplaced Board, and actively pursuing several current projects, despite having no significant cash on hand since the change in control of July 6th, 2020. As of September 30, 2023, the Company had $176,123 in cash. The Company intends to comply with the periodic reporting requirements of the Exchange Act for so long as it is subject to those requirements.
The Company’s current management believes the advantages of being a publicly held corporation will enable it to project further and faster growth during this market downturn. The Company’s principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through community-private partnerships within different US jurisdictions.
During the remainder of the fiscal year and beyond such time, we anticipate incurring costs related to the filing of Exchange Act reports, and investigating, analyzing, and consummating further local partnerships. We believe we will be able to meet these costs through the use of funds to be loaned by or invested in us by our stockholders, management or other investors. Our management and stockholders have indicated their intent to advance funds on behalf of the Company as needed in order to accomplish its business plan and comply with its Exchange Act reporting requirements; however, there are no agreements in effect between the Company and our management and stockholders specifically requiring that they provide any funds to the Company. As a result, there are no assurances that such funds will be advanced or that the Company will be able to secure any additional funding as needed.
While the Company has limited assets and no revenues to date, the Company has an exceptionally experienced management in finance, politics, and business and has unrestricted flexibility in seeking, analyzing and participating in potential urban renewal opportunities in the area of community redevelopment. In its efforts to analyze potential ventures, the Company will consider the following kinds of factors:
(a) potential for growth, indicated by local need and assigned local, state or federal funding and incentives towards urban renewal in that given locale.
(b) competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole.
(c) strength and diversity of current management.
(d) capital requirements and anticipated availability of required funds, to be provided by the Company or from operations, through ventures or similar arrangements, sales of securities, or from other sources.
(e) the extent to which the business opportunity can be advanced; and
In applying the foregoing criteria, not one of which will be definitive, management will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data. Potentially available urban renewal opportunities may occur in many different locales, and at various stages of development, all of which will make the task of comparative investigation and analysis of such urban renewal opportunities extremely difficult and complex. Due to the Registrant’s limited capital available for investigation, the Registrant may not discover or adequately evaluate adverse facts about the opportunity to be engaged. In addition, we will be competing against other entities that possess greater financial, technical, and managerial capabilities for identifying and completing new projects.
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In evaluating a prospective new project, we will conduct as extensive a due diligence review of potential targets as possible given our dependence upon the ever-changing city, state, and federal funding initiatives for urban redevelopment and our limited financial resources. We expect that our due diligence will encompass, among other things, meetings with the local government officials and inspection of its neighborhoods and infrastructure, as necessary, as well as a review of financial, government statistical data and other information which is made available to us. This due diligence review will be conducted primarily by our management or by unaffiliated third parties we may engage, including but not limited to attorneys, accountants, consultants or other such professionals. The costs associated with hiring third parties as required to complete a new project may be significant and are difficult to determine as such costs may vary depending on a variety of factors, including the locale, amount of time it takes to complete a new project, the location of the project, and the size and complexity of the business of the project. As of the date of this filing, the Company has identified several potential business opportunities. The Company is currently in discussions with several but not limited to developers, real estate owners, property management companies in Florida, the District and Maryland, to either acquire and or redevelop properties.
Our limited funds will likely make it difficult to conduct a complete and exhaustive investigation and analysis of a target project at this early stage without bringing on strategic local partners, which is part of our business plan, see infra. As a general rule, it normally requires approximately 3-6 months to carry out due diligence and meeting with local and state officials, and approximately 9-12 months to follow through to completion. The estimated costs for this period and need are anywhere from approximately $750,000 to $1,500,000.
The time and costs required to select and evaluate a target project and to structure and complete a new project cannot presently be ascertained with any degree of certainty. The amount of time it takes to complete a new project, the location of the project, the size and complexity of the project neighborhood, the scope of city, state, and federal regulations, and whether funds may be raised contemporaneously with the transaction are all factors that determine the costs associated with completing a new project transaction. The time and costs required to complete a new project can be estimated once a new project target has been identified. Any costs incurred with respect to the evaluation of a prospective new project that is not ultimately completed will result in a loss to us.
Through information obtained from industry professionals including attorneys, architects, developers, appraisers, accountants, commercial and residential real estate brokers, builders, engineers as well as other consultants with experience in the urban redevelopment sphere, there are literally thousands of new potential projects, and the aim of the management is to filter through these for the most reasonably achievable urban renewal projects.
We are and will continue for the foreseeable future to be a significant participant in large scale public-private urban renewals.
Nearly all similar companies have significantly greater financial resources; consequently, we will be at a competitive disadvantage in identifying possible urban renewal opportunities and successfully completing a new project. These competitive factors may reduce the likelihood of our identifying and consummating a successful new project.
Some of our officers are engaged in outside business activities, and as such will be dividing their time amongst these entities and anticipate that they will devote less than full time to our business until the successful project has been identified. The specific amount of time that management will devote to the Company may vary from week to week or even day to day, and therefore the specific amount of time that management will devote to the Company on a weekly basis cannot be ascertained with any level of certainty. In all cases, management intends to spend as much time as is necessary to exercise their fiduciary duties as an officer and/or director of the Company and believes that they will be able to devote the time required to consummate a new project transaction as necessary. We expect no significant changes in the number of our employees other than such changes, if any, incident to a new project.
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for quarterly financial statement presentation and in accordance with Form 10-Q. Accordingly, they include all of the information and footnotes required in quarterly financial statements. In the opinion of management, the unaudited financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of operations and cash flows. The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year.
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These unaudited financial statements should be read in conjunction with our December 31st, 2022, audited annual financial statements included in our Form 10-K, filed with the SEC on Jun 30th, 2023.
Going Concern
The accompanying unaudited 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 has accumulated loss of $60,798,004 as of September 30, 2023. These conditions raise substantial doubt about the ability of the Company to continue as a going concern.
The ability of the Company to continue as a going concern is dependent upon its abilities to generate revenues, to continue to raise investment capital, and develop and implement its business plan. No assurance can be given that the Company will be successful in these efforts.
Due to the uncertainty of our ability to meet our current operating and capital expenses, our independent auditors included an explanatory paragraph in their report on the audited financial statements for the year ended December 31, 2022, regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
Our audited condensed financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as a going concern. Our audited financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern. There is no assurance that our operations will be profitable. Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity.
Our future growth is dependent upon achieving further development projects and execution of development projects, engaging other company related opportunities, management of operating expenses, and the ability of the Company to obtain the necessary financing to fund future obligations, and upon profitable operations.
Stockholders’ Equity
Since its inception on August 16, 2010, the Company had accumulated deficit of $60,798,004 as of September 30, 2023.
The aggregated loss is related to the capital invested in advances real estate membership interest, which has future positive cash flow after completion and stabilization. See note 5.
Authorized Shares
Common Stock
The Company is authorized to issue up to 500,000,000 shares of common stock, par value $0.001 par value. Each outstanding share of common stock entitles the holder to one vote per share on all matters submitted to a stockholder vote. All shares of common stock are non-assessable and non-cumulative, with no pre-emptive rights. As of September 30, 2023, 86,038,098 shares of common stock were issued and outstanding.
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Preferred shares
The Company Authorizes and hereby creates 5,000,000 (Five Million) shares of preferred stock, with conversion rights of 1:1 (one to one), but with 30:1 voting rights. As of September 30, 2023, 0 shares of preferred stock were issued and outstanding.
Commitments and Contingencies
On April 8th, 2021, the Company executed a Senior Secured Convertible Promissory Note, Securities Purchase Agreement, and ancillary agreements (collectively, the “Agreements”) with Leonite Capital, LLC Per the terms of the Agreements with Leonite Capital, LLC, the Company may borrow up to $500,000; of which $500,000 was tendered, which is open with right of redemption for one year. On March 24th, 2023, the Company and Leonite Capital LLC executed an Amendment by which the outstanding balance was increased by $7,500.00, the fixed Conversion Price was reset to $0.03.
On September 30th, 2022 NextBank International, Inc, has entered into an agreement whereby it will convert the outstanding balance for shares at a strike price of $0.05, not to exceed 4.9% of the then issued and outstanding shares of the Company. On September 30, 2022, 1,420,700 shares have been committed to be converted in exchange for $71,035 of the outstanding balance and these shares were issued to Next Bank on October 4th, 2022. On January 23, 2023, 2,320,000 shares have been converted in exchange for $49,416 of the outstanding balance and these shares were issued to Next Bank on March 3rd, 2023.
We will require additional financing to implement our business plan, which may include joint venture projects and debt or equity financings. The nature of this enterprise and constraint of positive cash flow places debt financing beyond the creditworthiness required by most banks or typical investors of corporate debt until such time as economically viable profits and losses can be demonstrated. Therefore, any debt financing of our activities may be costly and result in substantial dilution to our stockholders.
Future financing through equity investments is likely to be dilutive to existing stockholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for our new investors. Newly issued securities may include preferences, superior voting rights, and the issuance of warrants or other derivative securities, which may have additional dilutive effects. Further, we may incur substantial costs in pursuing future capital and financing, including investment banking fees, legal fees, accounting fees, and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition.
Our ability to obtain needed financing may be impaired by such factors as the capital markets, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities, together with our revenue from operations, is not sufficient to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to cease operations.
There is no assurance that we will be able to obtain financing on terms satisfactory to us, or at all. We do not have any arrangements in place for any future financing. If we are unable to secure additional funding, we may cease or suspend operations. We have no plans, arrangements, or contingencies in place in the event that we cease operations.
Results of Operations
For the Three Months Ended September 30, 2023, and 2022
Revenues
The Company has earned $0 for the three months ended September 30, 2023 compared to $10,645 for the three months ended September 30, 2022.
Operating Expenses
For the three months ended September 30, 2023, our total operating expenses were $328,598 compared to $850,421 for the three months ended September 30, 2022, resulting in a decrease of $521,823. The decrease is attributable to a total decrease of $521,823 in general administration expenses.
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Net Operating loss
Net Operating loss was $328,598 compared to net Operating loss of $850,421 for the three months ended September 30, 2023, and September 30, 2022, for the reasons explained above.
Net loss from Continuing Operations
Net loss was $364,087 compared to a net loss of $1,154,674 for the three months ended September 30, 2023, and September 30, 2022. The decrease is attributable to a total decrease of $521,823 in general administration expenses and an decrease in other expenses of $269,959 and an increase in gross profit of $1,195.
Net loss from discontinuing Operations
Net loss from discontinuing Operations was $0 compared to a net loss of $ 0 for the three months ended September 30, 2023, and September 30, 2022 respectively.
Other Income
Other Income/(Expense) decreased to $(35,489) for the period ended September 30, 2023, from $(305,447) for the period ended September 30, 2022. The decrease was directly related to the swings in derivative fair values of $99,695. This was offset by a decrease in interest expense of $206,171 when compared to the period ended September 30, 2022.
For the Nine Months Ended September 30, 2023, and 2022
Revenues
The Company has earned $6,950 in revenue from real estate brokerage services for the nine months ended September 30, 2023 compared to $10,645 for the nine months ended September 30, 2022.
Operating Expenses
For the nine months ended September 30, 2023, our total operating expenses were $603,437 compared to $1,571,631 for the nine months ended September 30, 2022, resulting in a decrease of $968,194. The decrease is attributable to a total decrease of $968,194 in general administration expenses.
Net Operating loss
Net Operating loss was $603,437 compared to net Operating loss of $1,571,631 for the nine months ended September 30, 2023, and September 30, 2022, for the reasons explained above.
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Net loss from Continuing Operations
Net loss was $700,086 compared to a net loss of $1,913,124 for the nine months ended September 30, 2023, and September 30, 2022. The decrease is attributable to a total decrease of $968,194 in general administration expenses and an decrease in other expenses of $245,038 and an increase in gross profit of $195.
Net loss from discontinuing Operations
Net loss from discontinuing Operations was $0 compared to a net loss of $ 8,158,739 for the nine months ended September 30, 2023, and September 30, 2022 respectively. The decrease is attributable to discontinuing operations related to Investments in Real Estate Membership Interests.
Other Income
Other Income/(Expense) decreased to $(97,650) for the period ended September 30, 2023, from $(342,688) for the period ended September 30, 2022. The decrease was directly related to the swings in derivative fair values of $208,727. This was offset by a decrease in interest expense of $436,632 and other income of $17,752 when compared to the period ended September 30, 2022.
Liquidity and Capital Resources
Overview
The Company’s cash and cash equivalents balance was $118,245 as of September 30, 2023.
Net cash provided/(used) in the Company’s operating activities during the nine months ended September 30, 2023, was $131,083 as compared to net cash used in the operating activities of $1,011,070 during the corresponding period ended September 30, 2022. The change was primarily due to decrease in net loss and an increased prepaid expenses of $74,965, an increase in accounts payable of $147,870, an increase in interest payable of $105,389 increase in the advances $29,276 an increase of $183,933 in the accrued expenses between the two periods.
Net cash used in investing activities for the quarter ended September 30, 2023, and 2022 was $350,000 and $0, respectively.
Net cash provided in financing activities for the quarter ended September 30, 2023, and 2022 was $497,600 and $170,000 respectively. The change was primarily due increase in proceeds for shares committed $30,000, an increase in notes payable of $450,000, an increase in shareholders loan of $17,600 between the two periods.
Since its inception on August 16, 2010, the Company had a cumulative deficit of $60,798,004 and we have a working capital deficit of $6,131,916 as of September 30, 2023. Our future growth is dependent upon achieving further purchase orders and execution, management of operating expenses and the ability of the Company to obtain the necessary financing to fund future obligations, and upon profitable operations.
Historically, we have financed our cash flow and operations from contributions of our majority shareholder and by raising equity and convertible loans.
As of September 30, 2023, our cash balance was $118,245 we believe we will require a minimum of $5,000,000 in working capital over the next 12 months to grow the company as currently planned, covering our operating costs and maintaining our regulatory reporting and filings. Should our revenues not materialize as expected, or if our costs and expenses prove to be greater than we currently anticipate, or should we change our current business plan in a manner that will increase or accelerate our anticipated costs and expenses; we may need funds in excess of that currently planned.
It is our current policy that all transactions between the Company and our officers, directors and their affiliates will be entered into only if such transactions are approved by a majority of the existing directors, are approved by vote of the stockholders, or are fair to us as a corporation as approved or ratified by our Board of Directors or authorized officer. We will conduct an appropriate review of all related party transactions on an ongoing basis, and, where appropriate, we review the potential of conflicts of interest.
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Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies and Estimates
Use of Estimates
In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”), management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions made by management include, but are not limited to, revenue recognition, the allowance for bad debt, useful life of fixed assets, income taxes and unrecognized tax benefits, valuation allowance for deferred tax assets, and assumptions used in assessing impairment of long-lived assets. Actual results could differ from those estimates.
Lease
On January 2, 2020, the Company adopted FASB ASC Topic 842, Leases, or ASC 842, using the modified retrospective transition method with a cumulative effect adjustment to accumulated deficit as of January 1, 2019, and accordingly, modified its policy on accounting for leases as stated below. As described under “Recently Adopted Accounting Pronouncements,” below, the primary impact of adopting ASC 842 for the Company was the recognition in the consolidated balance sheet of certain lease-related assets and liabilities for operating leases with terms longer than 12 months. The Company elected to use the short-term exception and does not records assets/liabilities for short term leases as of September 30, 2023.
Revenue Recognition
In May 2014 the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes all existing revenue recognition requirements, including most industry-specific guidance. This new standard requires a company to recognize revenues when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. The FASB subsequently issued the following amendments to ASU No. 2014-09 that have the same effective date and transition date: ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations; ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing; ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients; and ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The Company adopted these amendments with ASU 2014-09 (collectively, the new revenue standards).
Under the new revenue standards, the Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods. The Company recognizes revenues following the five-step model prescribed under ASU No. 2014-09: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation. The Company recognized revenue from providing temporary and permanent staffing solutions and the sale of consumer products. Service revenues are recognized as the services are performed in proportion to the transfer of control to the customer and real estate revenues are recognized at the time of sale when consideration has been exchanged and title has been conveyed to the buyer. At this time, we have not identified specific planned revenue streams.
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Income Taxes
The Company accounts for income taxes using the asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in the tax law. For deferred tax assets, management evaluates the probability of realizing the future benefits of such assets. The Company establishes valuation allowances for its deferred tax assets when evidence suggests it is unlikely that the assets will be fully realized.
The Company recognizes the tax effects of an uncertain tax position only if it is more likely than not to be sustained based solely on its technical merits as of the reporting date and then only in an amount more likely than not to be sustained upon review by the tax authorities. Income tax positions that previously failed to meet the more likely than not threshold is recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more likely than not threshold is derecognized in the first subsequent financial reporting period in which that threshold is no longer met. The Company classifies potential accrued interest and penalties related to unrecognized tax benefits within the accompanying consolidated statements of operations and comprehensive income (loss) as the income tax expense.
Stock-based Compensation
Stock-based compensation cost to employees is measured at the date of grant, based on the calculated fair value of the stock-based award, and will be recognized as expense over the employee’s requisite service period (generally the vesting period of the award). Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The company has no stock-based compensation plan established as of September 30, 2023.
Derivative instruments
The fair value of derivative instruments is recorded and shown separately under liabilities. Changes in the fair value of derivatives liability are recorded in the consolidated statement of operations under other (income) expenses.
Our Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses the binomial option-pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
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Related Parties
The Company follows subtopic 850-10 of the FASB ASC for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 related parties include:
a. affiliates of the Company;
b. entities for which investments in their equity securities would be required, absent the election of the FV option under the FV Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity;
c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management;
d. principal owners of the Company;
e. management of the Company;
f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and
g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of financial statements is not required in those statements.
The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
New Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including those interim periods within those fiscal years. We did not expect the adoption of this guidance have a material impact on its consolidated financial statements.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of our Quarterly Report on Form 10-Q, an evaluation was carried out by management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act) as of September 30, 2023. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
During evaluation of disclosure controls and procedures as of September 30, 2023 conducted as part of our preparation of the quarterly unaudited condensed financial statements, management conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures and concluded that our disclosure controls and procedures were not effective.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for the preparation and fair presentation of the unaudited condensed financial statements included in this quarterly report. The unaudited condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States and reflect management’s judgment and estimates concerning effects of events and transactions that are accounted for or disclosed.
Management is also responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting includes those policies and procedures that pertain to our ability to record, process, summarize and report reliable data. Management recognizes that there are inherent limitations in the effectiveness of any internal control over financial reporting, including the possibility of human error and the circumvention or overriding of internal control. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to unaudited condensed financial statements presentation. Further, because of changes in conditions, the effectiveness of internal control over financial reporting may vary over time.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim unaudited condensed financial statements will not be prevented or detected on a timely basis. The material weaknesses identified are described below.
Procedures for Control Evaluation. Management has not established with appropriate rigor the procedures for evaluating internal controls over financial reporting. Due to limited resources and lack of segregation of duties, documentation of the limited control structure has not been accomplished.
Insufficient Documentation of Review Procedures We employ policies and procedures for reconciliation of the unaudited condensed financial statements and note disclosures.
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Insufficient Information Technology Procedures. Management has not established methodical and consistent data back-up procedures to ensure loss of data will not occur.
As a result of the management evaluation of company internal control over financial reporting described above, the Company’s management has concluded that, as of September 30, 2023, the Company’s internal control over financial reporting was not based on the criteria in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
This quarterly report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this quarterly report.
Changes in Internal Control Over Financial Reporting
As of the end of the period covered by this report, there have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the three months ended September 30, 2023, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Part II- Other Information
Item 1. Legal Proceedings
On May 20th, 2023, our CEO was made aware of a lawsuit by an ex-employee of the Company. The Company resolutely rejects the monetary claim for monies owed and while willing to negotiate in good faith, shall defend itself against said lawsuit and is now seeking dismissal of the same.
Item 1A. Risk Factors
We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 2. Recent Sale of Unregistered Securities
None.
Item 6. Exhibits
|
Exhibit Number |
Description | |
| 31.1* | Rule 13a-14(a) Certification of the Chief Executive Officer | |
| 31.2* | Rule 13a-14(a) Certification of the Chief Financial Officer | |
| 32.1* | Section 1350 Certification of Chief Executive Officer | |
| 32.2* | Section 1350 Certification of Chief Financial Officer | |
| 101.XBRL* | Inline XBRL Taxonomy files |
* Filed along with this document.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dated: November 21, 2023 | By: | /s/ Richard Balles |
|
Richard Balles Director, Chief Executive Officer | ||
| COMMUNITY REDEVELOPMENT INC. |
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