FGNV 10-K/A
Forge Innovation Development Corp. (FGNV)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
FORM
For
the fiscal year ended:
OR
For the transition period from _____________ to ____________
Commission
file number
(Exact name of small business issuer as specified in its charter)
(State or other jurisdiction of incorporation) |
(IRS Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(Issuer’s telephone number)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None.
Indicate
by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by a 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 has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
include in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The
aggregate market value of the voting and non-voting common equity held by non-affiliates of the issuer as of June 30, 2023 the last business
day of the Company’s most recently completed second fiscal quarter was $
As of April 15, 2024, there were shares of Common Stock, $0.0001 par value, outstanding.
Documents
Incorporated By Reference.
EXPLANATORY NOTE
| 1. | the date of the Report of Independent Registered Public Accounting Firm to April 16, 2024, and | |
| 2. | to include in the Certifications previously filed with our Form 10-K the introductory language in paragraph 4 to conform exactly to the language set forth in Exchange Act Rule 13a-14(a). |
In addition, pursuant to the rules of the SEC, the exhibit list included herein reflects currently dated certifications from the Company’s principal executive officer and principal accounting officer, which are filed as exhibits to this Amendment No. 1.
Except for the foregoing amended information, this Amendment No. 1 does not amend or update any other information contained in the Original Filing or reflect any events that have occurred after the filing date of the Original Filing. Accordingly, this Amendment No. 1 should be read in conjunction with the Original Filing.
TABLE OF CONTENTS
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CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
The information contained in this Report includes some statements that are not purely historical and that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as such, may involve risks and uncertainties. These forward-looking statements relate to, among other things, expectations of the business environment in which we operate, perceived opportunities in the market and statements regarding our mission and vision. 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. You can generally identify forward-looking statements as statements containing the words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the negatives of such terms, but the absence of these words does not mean that a statement is not forward-looking.
Forward-looking statements involve risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The forward-looking statements contained herein are based on various assumptions, many of which are based, in turn, upon further assumptions. Our expectations, beliefs and forward-looking statements are expressed in good faith on the basis of management’s views and assumptions as of the time the statements are made, but there can be no assurance that management’s expectations, beliefs or projections will result or be achieved or accomplished.
In addition to other factors and matters discussed elsewhere herein, the following are important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements: technological advances, impact of competition, dependence on key personnel and the need to attract new management, effectiveness of cost and marketing efforts, acceptances of products, ability to expand markets and the availability of capital or other funding on terms satisfactory to us. We disclaim any obligation to update forward-looking statements to reflect events or circumstances after the date hereof.
Unless expressly indicated or the context requires otherwise, the terms “Forge” “company,” “we,” “us,” and “our” in this document refer to Forge Innovation Development Corp., a Nevada corporation.
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PART I
Item 1. Description of Business.
Background
Forge Innovation Development Corp., or the “Company”, was initially incorporated in the State of Nevada on January 15, 2016 under the name of You-Go enterprises, LLC (the “Company Predecessor”). On November 3, 2016, the Company filed an amendment to its Articles of Incorporation in the State of Nevada to change the Company’s name to Forge Innovation Development Corp. Our principle executive office is located at 6280 Mission Blvd Unit 205,Jurupa Valley, CA 92509. Tel : 626-986-4566. The Company’s main business is focus on real estate development, land purchasing and selling and property management. On August 17, 2020, the Company established a wholly-owned subsidiary, Forge Network Inc, in the State of California. As of December 31, 2023, we have not generated any income from the subsidiary yet due to our business strategy adjustment.
On March 24, 2023, pursuant to an Asset Purchase Agreement between Forge Innovation Development Corp. (the “Company” or the “Buyer”) and Legend Investment Management, LLC (“Legend LLC” or the “Seller”), the Company acquired 77.3% of Legend LLC’s 66% ownership of Legend International Investment, LP (“Legend LP”). Legend LP owns 100% of Mission Marketplace; a grocery anchored shopping center (the “Property”) located at 6240 Mission Boulevard in Jurupa Valley, California. The Property contains two, one-story and one, two-story buildings containing 48,722 total square foot of gross leasable area situated on a 4.51acre site.
A relative of the President of the Company has significant influence of the Seller’s management, therefore the acquisition is being treated as a related party transaction. The Company acquired 51% interest of Legend LP from Legend LLC in exchanged for 1,967,143 common stocks of the Company, valued at $0.70 per share for a total purchase price of $1,377,000, which equals 51% of Legend LP’s approximate net value of $2,700,000 based on (1) the Property’s valuation appraisal report dated on February 20, 2023, (2) Legend LP’s net book value as of February 28, 2023, and (3) the loan agreement to Legend LP by a third-party lender effective on March 23, 2023. After the closing of the acquisition, the Company will own 51% of Legend LP and the Seller will own 15% of Legend LP.
Overview
The Company’s primary objective is commercial and residential land development, including, to a lesser extent, the possible purchase and sale of real estate, targeting properties primarily in Southern California. We also intend to manage properties we own and properties owned by unaffiliated third parties. Our activities will include securing acquisition rights to properties, obtaining zoning and other entitlements for the properties, securing financing for purchase of the properties, improving the properties’ infrastructure and amenities and selling the properties to homeowner and commercial owners for restaurants, offices and small businesses. Our first property acquisition was 29 acres in the city of Desert Hot Springs in Southern California. Due to problems with permits and adjacent landowners, rather than get involved in protracted negotiations, the Company sold the property to an independent third party for a profit.
On August 1, 2017, the Company entered into a property management agreement with Bloomage Beverly Hills Investment Inc. Pursuant to the agreement, the Company provided property management services for Bloomage Beverly Hills Investment Inc. in exchange for the compensation of $3,000 per month. During the year ended December 31, 2021, the service charges increased to $5,000 per month. In April 2022, we terminated the property management services with Bloomage Beverly Hills Investment Inc. due to the sales of the managed properties. During the years ended December 31, 2022, the Company recognized management service income of $15,000 under this agreement.
On April 2, 2022, the Company entered into a property management agreement (“PMA”) with Legend International Investment, LP. (the “Legend LP”), a previous related party of the Company and currently a subsidiary of the Company, of which the management is related to Mr. Patrick Liang, President and CEO of the Company. Pursuant to the PMA, the Company will manage the properties owned by Legend LP, which is called Mission Marketplace; a grocery anchored shopping center (the “Property”) located at 6240 Mission Boulevard in Jurupa Valley, California. The Property contains two, one-story and one, two-story buildings containing 48,722 total square foot of gross leasable area situated on a 4.51-acre site. The original monthly service charge was $5,000 which was amended to $10,000 per month in June 2022 due to Legend LP required additional management services for their properties. On November 17, 2022, the monthly service charge was amended to $15,000 due to new tenants moving in and additional management services desired. During the year ended December 31, 2022 and 2023, the Company recognized property management income from Legend LP in the amount of $107,000 and $45,000, respectively. The decrease was mainly due to the acquisition of Legend LP, which eliminated to recognize property management income from Legend LP as intercompany transaction for the year ended December 31, 2023.
On March 24, 2023, pursuant to an Asset Purchase Agreement between Forge Innovation Development Corp. (the “Company” or the “Buyer”) and Legend Investment Management, LLC (“Legend LLC” or the “Seller”), the Company acquired 77.3% of Legend LLC’s 66% ownership of Legend International Investment, LP (“Legend LP”). Legend LP owns 100% of Mission Marketplace; a grocery anchored shopping center (the “Property”) located at 6240 Mission Boulevard in Jurupa Valley, California. The Property contains two, one-story and one, two-story buildings containing 48,722 total square foot of gross leasable area situated on a 4.51acre site. As a result of the acquisition of Legend LP, the Company had total rent income generated by Legend LP of $393,474 for the year ended December 31, 2023, as compared to $nil during the year ended December 31, 2022, an increase of $393,474, or 100%. The increase was mainly resulted from the acquisition of Legend LP.
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Business Strategy
The Company’s business strategy includes the following three main segments of the real estate business:
| 1. | We intend to acquire and develop land for residential and commercial development. |
| 2. | We also, to a lesser extent, intend to develop a diversified real estate portfolio by investing in residential real estate, including single-family housing, condos and town-homes and commercial properties, including strip-malls and small office buildings. |
| 3. | We intend to provide property management for our own properties and for properties owned by non-affiliated third parties. |
Property Development
The Company primary business is to acquire land and develop and sell fully constructed homes and commercial property such as stores, offices, private schools, etc., to non-affiliated third parties. Our first property acquisition was 29 acres of vacant land in the city of Desert Hot Springs in Southern California. Our original plan was to build various commercial buildings on the parcels, including stores and restaurants. However, due to problems with permits and adjacent landowners that would lead to lengthy negotiations and possibly additional costs, the Company sold the property in March 2017, to a non-affiliated third party for a profit.
Our principal activities are securing acquisition rights to properties, obtaining zoning and other entitlements for the properties, securing financing for the purchase of the properties, improving the properties’ infrastructure and amenities, and selling properties to third parties. Currently all of our property development activities are centered in the Southern California area.
Investing in Development Projects
The Company intends to invest a small portion of its funds and to utilize funds pooled from investors to directly invest in income-yielding properties. The Company will concentrate on investing in properties with long-term leases.
We rely on our management’s expertise in identifying residential and commercial real estate assets within our stated target objectives. Our Management makes investment decisions based on various factors, including, relative value, expected risk-adjusted returns, current and projected credit fundamentals, current and projected macroeconomic considerations, current and projected supply and demand, credit and market risk concentration limits, liquidity, cost of financing and financing availability, as well as maintaining our exemption from registration under the 1940 Act.
Our targeted asset classes and the principal investments we have made and expect to make in each are as follows:
| Asset Class | Principal Investments | ||
| Residential Property | ● | Single family attached, Single Family detached, multi-unit, condominiums, townhomes, etc. | |
| Partially completed real estate developments, residential, commercial, retail. | ● | Acquisition and sale of vacant land | |
| REO Tape Transactions | ● | Bulk or block acquisitions of single family detached residential units or homes. | |
Our primary business strategy is to seek out and secure real estate properties that may have been formerly subjected to distressed financing terms as a consequence of recent economic factors. Our focus is on residential, single-family detached homes throughout Southern California made available individually or bulk transfer from various private parties or financial institutions seeking to liquidate non-performing assets.
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Another business strategy is designed to generate a rate of return by acquiring distressed properties (individually or in bulk transaction(s)) for investment purposes and eventual resale. We believe there is a significant market opportunity to acquire discounted real estate assets or in some instances, to lend to or invest with real estate developers and property owners or otherwise participate in real estate related investments where non-traditional financing sources are not available. The current credit crisis and economic environment and the strict underwriting standards and length of time required by traditional sources including banking institutions are often prohibitive.
Property Management
In many cases we will manage our own properties and market our property management service to others. Property management involves most of the following duties
| ● | Establishes rental rate by surveying local rental rates; calculating overhead costs, depreciation, taxes, and profit goals. | |
| ● | Attracts tenants by advertising vacancies; obtaining referrals from current tenants; explaining advantages of location and services; showing units. | |
| ● | Contracts with tenants by negotiating leases; collecting security deposit. | |
| ● | Accomplishes financial objectives by collecting rents; paying bills; forecasting requirements; preparing an annual budget; scheduling expenditures; analyzing variances; initiating corrective action. | |
| ● | Maintains property by investigating and resolving tenant complaints; enforcing rules of occupancy; inspecting vacant units and completing repairs; planning renovations; contracting with landscaping and snow removal services. | |
| ● | Maintains building systems by contracting for maintenance services; supervising repairs. | |
| ● | Secures property by contracting with security patrol service; installing and maintaining security devices; establishing and enforcing precautionary policies and procedures; responding to emergencies. | |
| ● | Enforces occupancy policies and procedures by confronting violators. | |
| ● | Prepares reports by collecting, analyzing, and summarizing data and trends. |
We also intend to provide the following special services to our third part owners:
| ● | Legal Services |
| – | Eviction Coordination | |
| – | Personal Property Management | |
| – | Property Inspections |
| ● | Closing — Title Services |
| – | Title Closing Documents and Preparation | |
| – | Escrow and Closing Coordination | |
| – | HUD Reviews and Analysis |
| ● | Reports |
| – | Daily, Weekly or Monthly Reporting | |
| – | Custom Reports | |
| – | Performance Reports |
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| ● | Accounting — Financial |
| – | Expenses Report and Management | |
| – | Expense Tracking | |
| – | Review and Process Reimbursements |
Sales and Marketing
We intend to market our properties through real estate brokers and agents coordinated by company marketing personnel. Our marketing efforts will target both international and local buyers and builders. We also look for suitable real estate projects for management and operation.
Competition
We believe there are only limited barriers to entry in our business. Current and future competitors may have more resources than we have. Our projects face competition generally from REITs, institutional pension plans and other public and private real estate companies and private real estate investors for the acquisition of properties and for raising capital. In transaction services, we face competition with other real estate firms in the acquisition and disposition of properties, and we also compete with other sponsors of real estate for investors to provide the capital to allow us to make these investments. We also compete against other real estate companies who may be chosen by a broker-dealer as an investment platform instead of us. In management services, we compete with other properties for viable investors for properties. We also believe that our broker dealers compete, or will compete, with institutions that provide or arrange for other types of financing through private or public offerings of equity or debt and from traditional bank financings.
Real estate development is a highly competitive business. We compete with numerous developers, builders and others for the acquisition of property. As we attempt to expand our operations we will certainly be competing with other business ranging from large multinational corporations to small startup business such as ourselves. Many of our competitors may have longer operating histories, better brand recognition and greater financial resources than we do. To successfully compete in our industry, we will need to:
| ● | Ensure that investments in our projects are affordable; | |
| ● | That we only invest in properties in well-priced locations; | |
| ● | That our investment strategy is simple to understand; and | |
| ● | That we provide outstanding customer service and rigid integrity in our business dealings. |
However, there can be no assurance that even if we do these things we will be able to compete effectively with the other companies in our industry. We believe we have the required management expertise in sourcing properties with good development potential and affordable price.
We are committed to work and communicate with our investors and sales consultants to identify their goals and needs which will make it easier to continually provide them with the best products and services.
Government Regulations
Real Property Development
Land development permits and approvals are required to develop real property. These permits and approvals will vary depending on the land that is being developed.
The commercial and residential real estate development industry is subject to substantial environmental, building, construction, zoning and real estate regulations that are imposed by various federal, state and local authorities. In developing a community, we must obtain the approval of numerous government agencies regarding such matters as permitted land uses, housing density, the installation of utility services (such as water, sewer, gas, electric, telephone and cable television) and the dedication of acreage for open space, parks, schools and other community purposes. Regulations affect commercial building and homebuilding by specifying, among other things, the type and quality of building materials that must be used, certain aspects of land use and building design and the manner in which homebuilders may conduct their sales, operations, and overall relationships with potential renters and buyers. Furthermore, changes in prevailing local circumstances or applicable laws may require additional approvals, or modifications of approvals previously obtained. These permits and approvals will vary depending on the land that is being developed.
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Timing of the initiation and completion of development projects depends upon receipt of necessary authorizations and approvals. Because of the provisional nature of these approvals and the concerns of various environmental and public interest groups, the approval process can be delayed by withdrawals or modifications of preliminary approvals and by litigation and appeals challenging development rights. Our ability to develop projects could be delayed or prevented due to litigation challenging previously obtained governmental approvals. We also may be subject to periodic delays or may be precluded entirely from developing in certain communities due to building moratoriums or “slow-growth” or “no-growth” initiatives that could be implemented in the future. Such delays could adversely affect our ability to complete our projects, significantly increase the costs of doing so or drive potential customers to purchase competitors’ products.
Management Services
We and our brokers, salespersons and, in some instances, property managers are regulated by the states in which we do business. These regulations may include licensing procedures, prescribed professional responsibilities and anti-fraud provisions. Our activities are also subject to various local, state, national and international jurisdictions’ fair advertising, trade, housing and real estate settlement laws and regulations and are affected by laws and regulations relating to real estate and real estate finance and development.
Environmental Compliance
Federal, state and local laws and regulations impose environmental zoning restrictions, use controls, disclosure obligations and other restrictions that impact the management, development, use or sale of real estate. Such laws and regulations tend to discourage sales and leasing activities with respect to some properties. If transactions in which we are involved are delayed or abandoned as a result of these restrictions, our business could be adversely affected. In addition, a failure by us to disclose environmental concerns to potential investors or third-party buyers of the developed property may subject our company to liability and may adversely impact our business or cause us to incur costs for cleanup of hazardous substances or wastes or other environmental liabilities.
Various environmental laws and regulations also can impose liability for the costs of investigating or remediating hazardous or toxic substances at sites currently or formerly owned or operated by a party, or at off-site locations to which such party sent wastes for disposal. As a property manager, we could be held liable as an operator for any such contamination; even if the original activity was legal and we had no knowledge of, or did not cause, the release or contamination. Further, because liability under some of these laws is joint and several, we could be held responsible for more than our share, or even all, of the costs for such contaminated site if the other responsible parties are unable to pay. Similarly, we are generally obliged, under the debt financing arrangements on the properties owned by us, to provide an indemnity to the lenders for environmental liabilities and to remediate any environmental problems that might arise. Insurance for these matters may not always be available, or sufficient to cover our losses.
Employees
Currently the Company has 1 employee, Mr. Liang, the President/CEO of the Company, who devotes approximately 100% of his time to the business of the Company.
Reports to Security Holders
The Company’s documents filed with the Securities and Exchange Commission may be inspected at the Commission’s principal office in Washington, D.C. Copies of all or any part of the registration statement may be obtained from the Public Reference Section of the Securities and Exchange Commission, 100 F Street N.E., Washington, D.C. 20549. Call the Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms. The Securities and Exchange Commission also maintains a web site at http://www.sec.gov that contains reports, proxy statements and information regarding registrants that file electronically with the Commission. All of the Company’s filings may be located under the CIK number 0001687919.
Item 1A. Risk Factors.
Not applicable to smaller reporting companies
Item 1B. Unresolved Staff Comments.
None
Item 2. Properties.
The Company’s subsidiary, Legend LP owns 100% of Mission Marketplace, a grocery anchored shopping center locates at 6240 Mission Boulevard in Jurupa Valley, California. The Property contains two, one-story and one, two-story buildings containing 48,722 total square foot of gross leasable area situated on a 4.51acre site.
Item 3. Legal Proceedings.
On December 8, 2017, the Company entered into a lease agreement with Puente Hills Business Center II, L.P. (“PHBC-II”) for a lease term of forty-eight months, and which was scheduled to expire on January 14, 2022, at monthly rent of $4,962, subject to increase. On or about September 29, 2020, the Company vacated the premises. On October 22, 2020, PHBC-II filed a lawsuit against the Company and its guarantor, Mr. Liang. The Company has retained legal counsel to address the matter and the Court has rescheduled the trial date from January 31, 2023 to April 18, 2023, and then again rescheduled to June 14, 2023. On July 14, 2023, the Company reached a settlement with PHBC-II and agreed to pay rent of $100,000 and rent deposit of $13,953 became nonrefundable. During the year ended Decembe 31, 2023, the Company recognized settlement loss of $30,883 which is included in other income (expense), net, on the consolidated statement of operations. As of December 31, 2023, the Company had $80,588 in rent payable to PHBC-II, with $40,588 within one year and $40,000 due after one year.
Item 4. Mine Safety Disclosures.
None.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
There has only been limited trading for the Company’s Common Stock since it began trading on September 25, 2018. There is no assurance that an active trading market will ever develop or, if such a market does develop, that it will continue. The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for purposes relevant to the Company, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person’s account for transactions in penny stocks and (ii) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience and objectives of the person and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form, (i) sets forth the basis on which the broker or dealer made the suitability determination and (ii) that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading, and about commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
Because of these regulations, broker-dealers may encounter difficulties in their attempt to buy or sell shares of our common stock, which may affect the ability of our shareholders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our common stock in the market place. In addition, the liquidity for our common stock may be decreased, with a corresponding decrease in the price of our common stock. Our shares are likely to be subject to such penny stock rules for the foreseeable future.
On August 31, 2018, our common stock was approved for quotation on the OTCQB Markets under the symbol “FGNV”. The OTC Markets is a regulated quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter equity securities. The OTC Markets securities are traded by a community of market makers that enter quotes and trade reports. This market is limited in comparison to the national stock exchanges and any prices quoted may not be a reliable indication of the value of our common stock.
On April 15, 2024, the closing price of our common stock reported on the OTCQB Markets was $1.26 per share. The following table sets forth, for each of the quarterly periods indicated, the high and low closing prices of our common stock, as reported on the OTCQB.
| Fiscal 2021 | Low | High | ||||||
| First Quarter | $ | 1.50 | $ | 5.00 | ||||
| Second Quarter | $ | 1.00 | $ | 5.00 | ||||
| Third Quarter | $ | 2.01 | $ | 4.25 | ||||
| Fourth Quarter | $ | 1.00 | $ | 3.26 | ||||
| Fiscal 2022 | Low | High | ||||||
| First Quarter | $ | 0.99 | $ | 1.00 | ||||
| Second Quarter | $ | 0.99 | $ | 1.32 | ||||
| Third Quarter | $ | 1.10 | $ | 1.32 | ||||
| Fourth Quarter | $ | 1.10 | $ | 1.10 | ||||
| Fiscal 2023 | Low | High | ||||||
| First Quarter | $ | 1.10 | $ | 1.10 | ||||
| Second Quarter | $ | 0.75 | $ | 1.10 | ||||
| Third Quarter | $ | 0.75 | $ | 0.76 | ||||
| Fourth Quarter | $ | 0.76 | $ | 1.26 | ||||
| Fiscal 2024 | Low | High | ||||||
| First Quarter through April 15, 2024 | $ | 1.26 | $ | 1.26 | ||||
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Holders
There are approximately 53 beneficial holders of the Company’s Common Stock. This figure does not include holders of shares registered in “street name” or persons, partnerships, associates, corporations or other entities identified in security position listings maintained by depositories.
Dividends
We have not declared any cash dividends on our common stock since our inception and do not anticipate paying any dividends in the foreseeable future. We plan to retain future earnings, if any, for use in our business. Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts, as the Board of Directors deems relevant.
Securities Authorized under Equity Compensation Plans
We do not have any equity compensation plans.
Securities Currently Outstanding
| ● | Our Certificate of Incorporation authorizes the issuance of 200,000,000 shares of common stock, of which 50,389,011 shares were issued and outstanding, as of April 15, 2024. | |
| ● | Our Certificate of Incorporation authorizes us to issue up to 50,000,000 shares of preferred stock with no share issued and outstanding as of April 15, 2024. |
Repurchases of Equity Securities
None
Reports to Stockholders
We are currently subject to the information and reporting requirements of the Securities Exchange Act of 1934 and will continue to file periodic reports, and other information with the SEC.
Transfer Agent
West Coast Stock Transfer, Inc., located at 721 N. Vulcan Ave. 1st FL, Encinitas, CA 92024 is the transfer agent for the Company’s common stock. Their telephone number is (619)-664-4780.
Recent Sales of Unregistered Securities
None.
Repurchase of Equity Securities
None.
Additional Information
We are a reporting issuer, subject to the Securities Exchange Act of 1934. Our Quarterly Reports, Annual Reports, and other filings can be obtained from the SEC’s Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. You may also obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission at http://www.sec.gov.
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Item 6. Selected financial Data.
Not required under Regulation S-K for “smaller reporting companies.”
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.
This 10−K contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with the audited consolidated financial statements and accompanying notes and the other financial information appearing elsewhere in this report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events.
Overview
Forge Innovation Development Corp., or the “Company”, was initially incorporated in the State of Nevada on January 15, 2016 under the name of You-Go enterprises, LLC (the “Company Predecessor”). On November 3, 2016, the Company filed an amendment to its Articles of Incorporation in the State of Nevada to change the Company’s name to Forge Innovation Development Corp. The Company’s primary objective is commercial and residential land development, including the purchase and sale of real estate, targeting properties primarily in Southern California. We also intend to manage properties we own, and properties owned by unaffiliated third parties. Our activities will include securing acquisition rights to properties, obtaining zoning and other entitlements for the properties, securing financing for purchase of the properties, improving the properties’ infrastructure and amenities and selling the properties to homeowner and commercial owners for restaurants, offices and small businesses. Our first property acquisition was 29 acres in the city of Desert Hot Springs in Southern California. Due to problems with permits and adjacent landowners, rather than getting involved in protracted negotiations, the Company sold the property to an independent third party for a profit.
On August 17, 2020, the Company established a wholly-owned subsidiary, Forge Network Inc, in the State of California. As of December 31, 2023, we have not generated any income from the subsidiary yet due to our business strategy adjustment.
On March 24, 2023, pursuant to an Asset Purchase Agreement between Forge Innovation Development Corp. (the “Company” or the “Buyer”) and Legend Investment Management, LLC (“Legend LLC” or the “Seller”), the Company acquired 77.3% of Legend LLC’s 66% ownership of Legend International Investment, LP (“Legend LP”). Legend LP owns 100% of Mission Marketplace; a grocery anchored shopping center (the “Property”) located at 6240 Mission Boulevard in Jurupa Valley, California. The Property contains two, one-story and one, two-story buildings containing 48,722 total square foot of gross leasable area situated on a 4.51acre site.
A relative of the President of the Company has significant influence of the Seller’s management, therefore the acquisition is being treated as a related party transaction. The Company acquired 51% interest of Legend LP from Legend LLC in exchanged for 1,967,143 common stocks of the Company, valued at $0.70 per share for a total purchase price of $1,377,000, which equals 51% of Legend LP’s approximate net value of $2,700,000 based on (1) the Property’s valuation appraisal report dated on February 20, 2023, (2) Legend LP’s net book value as of February 28, 2023, and (3) the loan agreement to Legend LP by a third-party lender effective on March 23, 2023. After the closing of the acquisition, the Company will own 51% of Legend LP and the Seller will own 15% of Legend LP.
Results of Operation for the years ended December 31, 2023 and 2022
For the year ended December 31, 2023, we had total revenue of $438,474, as compared to $122,604 for the year ended December 31, 2022, an increase of $315,870 or 258%. The increase was mainly due to the acquisition of Legend LP in the first quarter of 2023.
For the year ended December 31, 2023, we had property management income of $45,000, as compared to $122,604 for the year ended December 31, 2022, a decrease of $77,604. The decrease was mainly due to the acquisition of Legend LP, which eliminated to recognize property management income from Legend LP as intercompany transaction for the year ended December 31, 2023.
For the year ended December 31, 2023, the Company had total rent income generated by Legend LP of $393,474 as compared to $nil during the year ended December 31, 2022, an increase of $393,474, or 100%. The increase was mainly resulted from the acquisition of Legend LP.
During the years ended December 31, 2023 and 2022, the Company incurred general and administrative expenses of $234,596 and $112,016, respectively. During the same period of 2022 and 2023, the depreciation expense increased from $15,621 to $252,193, and property operating expense increased from $nil to $114,808. The increases in expenses are mainly due to the acquisition of Legend LP, which leads more depreciation expenses and property operating related expenses.
During the years ended December 31, 2023 and 2022, the Company had interest expense, net of $466,640 and $nil occurred from the loans of Legend LP, respectively.
During the years ended December 31, 2023 and 2022, the Company had gain on bargain purchase of $487,688 and $nil on the acquisition of Legend LP, respectively.
For the years ended December 31, 2023 and 2022, the Company had share-based compensation of $1,031,014 and $nil, respectively. The increase is due to the adoption of 2023 Equity Incentive Plan and the issuance of 2,800,000 shares of common stocks under the plan to the Company’s 2023 Equity Incentive Plan.
Equity and Capital Resources
We have incurred losses since inception of our business in 2016 and, as of December 31, 2023, we had an accumulated deficit of $2,485,934. As of December 31, 2023, we had cash of $4,892 and a negative working capital of $482,138, compared to cash of $11,734 and a working capital deficit of $140,204 on December 31, 2022. The increase in the working capital deficit was primarily due to cash used to pay for operating expenses, acquisition of property and equipment, and repayment of loans.
| 8 |
Going Concern Assessment
The Company demonstrates adverse conditions that raise substantial doubt about the Company’s ability to continue as a going concern. These adverse conditions are negative financial trends, specifically cash outflow from operating activities, operating losses, accumulated deficit and other adverse key financial ratios.
Management’s plan to alleviate the substantial doubt about the Company’s ability to continue as a going concern include attempting to improve its business profitability, its ability to generate sufficient cash flow from its operations and execute the business plan of the Company in order to meet its operating needs on a timely basis. However, there can be no assurance that these plans and arrangements will be sufficient to fund the Company’s ongoing capital expenditures and other requirements.
The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that the Company cannot continue as a going concern.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Policies
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires making estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The critical accounting policies are discussed in further detail in the notes to the audited consolidated financial statements appearing elsewhere in this report. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Not required under Regulation S-K for “smaller reporting companies.”
Item 8. Consolidated Financial Statements and Supplementary Data
Our audited consolidated financial statements are set forth in this Annual Report beginning on page F-3.
| 9 |
FRORGE INNOVATION DEVELOPMENT CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| F-1 |
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Forge Innovation Development Corp.
Jurupa Valley, California
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Forge Innovation Development Corp. and subsidiary (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operation, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt About the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations, has a net capital deficiency, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/
We have served as the Company’s auditor since 2016.
PCAOB
ID:
April 16, 2024
| F-2 |
FORGE INNOVATION DEVELOPMENT CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2023 | December 31, 2022 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Rent receivable | ||||||||
| Deferred share-based compensation | ||||||||
| Prepaid expense and other current assets | ||||||||
| Total Current Assets | ||||||||
| NONCURRENT ASSETS | ||||||||
| Property and equipment, net | ||||||||
| Real estate investments, net | ||||||||
| Rent deposit | ||||||||
| Total Non-Current Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Due to related parties | ||||||||
| Unearned revenue | ||||||||
| Rent payable, current | ||||||||
| Loan payables | ||||||||
| Total Current Liabilities | ||||||||
| Security deposits payable | ||||||||
| Rent payable | ||||||||
| Long term portion of Chase auto loan | ||||||||
| Long term portion of SBA loan | ||||||||
| Commercial loan | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| EQUITY (DEFICIT) | ||||||||
| Preferred stock, $ par value, shares authorized; share issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Forge Stockholders’ Equity (Deficit) | ( | ) | ||||||
| Noncontrolling interests | ||||||||
| Total Equity (Deficit) | ( | ) | ||||||
| TOTAL LIABILITIES AND EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
FORGE INNOVATION DEVELOPMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the years ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenues | ||||||||
| Property management income | $ | $ | ||||||
| Property management income from a related party | ||||||||
| Rent income | ||||||||
| Total revenues | ||||||||
| Operating Expenses | ||||||||
| Professional expenses | ||||||||
| Depreciation expense | ||||||||
| Share-based compensation | ||||||||
| Selling, general and administrative expenses | ||||||||
| Property operating | ||||||||
| Total operating expenses | ||||||||
| Other income (expenses): | ||||||||
| Interest expense and loan fee, net | ( | ) | ||||||
| Gain on bargain purchase | ||||||||
| Gain on debt settlement | ||||||||
| Gain on sale of property and equipment | ||||||||
| Other income (expense), net | ( | ) | ||||||
| Total other income, net | ||||||||
| Net loss before income tax | ( | ) | ( | ) | ||||
| Income tax expense | ( | ) | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss attributable to non-controlling interests in a subsidiary | ( | ) | ||||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares outstanding: | ||||||||
| Basic and diluted | ||||||||
| Earnings per share: | ||||||||
| Basic and diluted | $ | ) | $ | ) | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
FORGE INNOVATION DEVELOPMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the years ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation expense | ||||||||
| Share-based compensation | ||||||||
| Gain on debt settlement | ( | ) | ||||||
| Gain on sale of property and equipment | ( | ) | ||||||
| Gain on bargain purchase | ( | ) | ||||||
| Change in operating assets and liabilities: | ||||||||
| Rent receivable | ( | ) | ||||||
| Prepaid expense and other current assets | ( | ) | ||||||
| Accrued interest | ||||||||
| Rent deposit | ||||||||
| Rent payable | ( | ) | ||||||
| Unearned revenue | ( | ) | ||||||
| Other current liability – related party | ( | ) | ||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Security deposits payable | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Cash acquired from Legend | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Repayment of SBA loan and car loans | ( | ) | ( | ) | ||||
| Repayment to related parties | ( | ) | ||||||
| Proceeds from third parties | ||||||||
| Advance from related parties | ||||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net decrease in Cash | ( | ) | ( | ) | ||||
| Cash at beginning of period: | ||||||||
| Cash at end of period: | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFOR | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| NONCASH TRANSACTION OF INVESTING ACTIVITIES | ||||||||
| Shares issued for acquisition of Legend, including noncontrolling | $ | $ | ||||||
| Net loan carried through purchase of vehicle with trade-in | $ | $ | ||||||
| Additional real estate investment paid through commercial loans | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
FORGE INNOVATION DEVELOPMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
Number of Shares | Common Shares | Additional Paid-in Capital | Accumulated Deficit | Noncontrolling interests | Total Equity | |||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Shares issued for compensation | ||||||||||||||||||||||||
| Acquisition of Legend | ||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
Forge Innovation Development Corp. and Subsidiaries
Notes to the consolidated financial statements
Note 1 - Organization and Description of Business
Forge Innovation Development Corp. (individually “Forge” and collectively with its subsidiary, the “Company”), was initially incorporated in the State of Nevada on January 15, 2016 under the name of You-Go Enterprises, LLC (the “Company Predecessor”). On November 3, 2016, Forge amended its Articles of Incorporation in the State of Nevada to change the Company Predecessor’s name to Forge Innovation Development Corp. Our current principle executive office is located at 6280 Mission Blvd Unit 205, Jurupa Valley, CA 92509. The Company’s main business focuses on real estate development, land purchasing and selling and property management. The Company’s common stock is currently traded on OTCQB under the symbol “FGNV”.
On August 17, 2020, the Company established a wholly-owned subsidiary, Forge Network Inc, in the State of California. As of December 31, 2023, we have not generated any income from the subsidiary yet due to our business strategy adjustment.
On
March 24, 2023, pursuant to an Asset Purchase Agreement between Forge Innovation Development Corp. (the “Company” or the
“Buyer”) and Legend Investment Management, LLC (“Legend LLC” or the “Seller”), the Company acquired
A
relative of the President of the Company has significant influence of the Seller’s management, therefore the acquisition is being
treated as a related party transaction. The Company acquired
Note 2 - Summary of Significant Accounting Policies
Principles of Consolidation
The Company’s consolidated financial statements refer to Forge and its subsidiary. All intercompany transactions and balances were eliminated in consolidation.
Basis of Presentation
This summary of significant accounting policies is presented to assist in understanding the Company’s consolidated financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America, and have been consistently applied in the preparation of the consolidated financial statements.
Use of Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. In the opinion of management, all adjustments necessary in order to make the consolidated financial statements not misleading have been included. Actual results could differ from those estimates.
Cash
The
Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Cash on December 31, 2023 and 2022 were $
Rent Receivables
Rent
receivables refer to the differences of the total rental revenue recognized on a straight-line basis over the lease terms in accordance
US GAAP ASC 842 and the total rent payments received according to lease agreements. As of December 31, 2023 and 2022, the rent receivable
balances were $
Real estate investments, net
Land, building, and improvements are stated at cost, less accumulated depreciation and amortization. Major replacements and betterments, capital improvements and tenant improvements activities, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives, while ordinary repairs and maintenance are expensed as incurred. Buildings and improvements that are under redevelopment, or are being developed, are carried at cost and no depreciation is recorded on these assets. Additionally, amounts essential to the development of the property, such as pre-construction, development, construction, interest and other costs incurred during the period of development are capitalized. The Company ceases capitalization when the property is available for occupancy upon substantial completion of tenant improvements, but in any event no later than one year from the completion of major construction activity. Depreciation and amortization are provided primarily by the straight-line method over the estimated useful lives of the assets for financial statement purposes and by accelerated methods for income tax purposes. Estimated useful lives for financial statement purposes are as follows:
Building Computer equipment and software |
||
| Building improvements | ||
| Equipment, furniture and fixtures |
Land is not depreciated because land is assumed to have an unlimited useful life. Upon sale or retirement of depreciable assets, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is recognized.
Property and equipment, net
Property and equipment are carried at cost. Equipment is depreciated on a straight-line basis (after taking into account their respective estimated residual value) over 5 years, the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.
Fair Value of Financial Instruments
The Company’s consolidated balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.
| F-7 |
ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
| ● | Level 1 - | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
| ● | Level 2 - | Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
| ● | Level 3 - | Inputs that are both significant to the fair value measurement and unobservable. |
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2023 and 2022. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash, accounts receivable, accounts payable, due to related parties, and loans, current.
Operating Leases
The Company adopted ASC 842 on January 1, 2019. The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liability, and operating lease liability, non-current in the Company’s balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company used an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
Related Parties
The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.
| F-8 |
Impairment of long-lived assets
Long-lived assets are tested for impairment in accordance with ASC 360-10-45 “Impairment or Disposal of Long-Lived Assets”. The Company periodically evaluates potential impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. No impairment of long-lived assets was recognized for the years ended December 31, 2023 and 2022.
Business Combination
We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair values of these identifiable assets and liabilities over the fair value of purchase consideration is recorded as gain on bargain purchase included in other income on the consolidated statement of operations.
Non-controlling Interests
Non-controlling interests are portions of entities included in the consolidated financial statements that are not attributable to the Company. Non-controlling interests are identified separately from the Company’s stockholders’ equity and its net income (loss). Non-controlling interest equity balances include the non-controlling entity’s initial contribution at the date of the original acquisition, on-going contributions, distributions, and percentage share of earnings since inception. The non-controlling interests are calculated based on percentages of ownership.
Revenue Recognition
On January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers, using the modified retrospective approach, which applies the new standard to contracts that are not completed as of the date of adoption. Under the new standard, revenue is recognized upon transfer of control of promised goods and services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those goods and services.
Revenue streams that are scoped into ASU 2014-09 include:
Property management services
The Company deals directly with prospects and tenants for the owners of properties, which mainly includes marketing property, collecting rent, handling maintenance, repairing issues and responding to tenant complaints. The Company recognizes revenue as earned on a monthly basis and has concluded this is appropriate under the new standard.
Rental income
The Company’s rental income, which is derived primarily from lease contracts through Legend LP, includes rents that each tenant pays in accordance with the terms of each lease reported on a straight-line basis over the non-cancelable term of the lease. The Company defers the revenue related to lease payments received from tenants in advance of their due dates. In addition to base rent, the Company’s lease agreements generally require tenants to pay or reimburse the Company for all property operating expenses, which primarily reflect insurance costs and real estate taxes incurred by the Company and subsequently reimbursed by the tenant. However, some limited property operating expenses that are not the responsibility of the tenant are absorbed by the Company. Under ASC 842, the Company has elected to report combined lease and non-lease components in a single line “Revenue from tenants.” For expenses paid directly by the tenant, under both ASC 842 and 840, the Company has reflected them on a net basis.
| F-9 |
If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance that is funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term. Tenant improvement ownership is determined based on several factors including, but not limited to:
● whether the lease stipulates how and on what a tenant improvement allowance may be spent.
● whether the tenant or landlord retains legal title to the improvements at the end of the lease term.
● whether the tenant improvements are unique to the tenant or general-purpose in nature; and
● whether the tenant improvements are expected to have any residual value at the end of the lease.
Pursuant to the lease agreements, the Company receives
security deposits which will be refunded or applied as final payments as outlined in the agreements. Such security deposits are recorded
as liabilities for the Company on the consolidated balance sheet. As of December 31, 2023 and 2022, security deposits totaled $
The Company accounts for stock options and other equity-based compensation issued in accordance with ASC 718 “Stock Compensation”, which requires the measurement and recognition of compensation expense related to the fair value of equity-based compensation awards that are ultimately expected to vest. Stock-based compensation expense recognized includes the compensation cost for all share-based compensation payments granted to employees and nonemployees, net of estimated forfeitures, over the employees’ requisite service period or the non-employee performance period based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported.
Segment reporting
The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable segments. During the years ended December 31, 2023 and 2022, the Company had one single segment in property management and rental.
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
The Company computes basic and diluted loss per share amounts in accordance with ASC Topic 260, Earnings per Share. Basic earnings per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted loss per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.
The Company does not have any potentially dilutive instruments as of December 31, 2023 and 2022 and, thus, anti-dilution issues are not applicable.
New Accounting Standards Adopted
In June 2016, the FASB issued ASU No. 2016-13, (Topic 326), Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments which amends the current accounting guidance and requires the use of the new forward-looking “expected loss” model, which requires all expected losses to be determined based on historical experience, current conditions and reasonable and supportable forecasts, rather than the “incurred loss” model. This guidance amends the accounting for credit losses for most financial assets and certain other instruments including trade and other receivables, held-to-maturity debt securities, loans and other instruments. The Company adopted ASU No. 2016-13 on January 1, 2023, which had no impact on the beginning balance of the Company’s balance as there was no receivable balances as of January 1, 2023.
New Accounting Standards Note Adopted
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amended guidance requires incremental reportable segment disclosures, primarily about significant segment expenses. The amendments also require entities with a single reportable segment to provide all disclosures required by these amendments, and all existing segment disclosures. The amendments will be applied retrospectively to all prior periods presented in the financial statements and is effective for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently in the process of evaluating the impact this amended guidance may have on the footnotes to its consolidated financial statements.
Income Tax Disclosures - In December 2023, the Financial Accounting Standards Board (FASB) released ASU No. 2023-09, titled “Income Taxes (Topic 740): Enhancements to Income Tax Disclosures” (referred to as “ASU 2023-09”). This new standard mandates the disclosure, on an annual basis, of specific categories in the rate reconciliation and the disaggregation of income taxes paid by jurisdiction. ASU 2023-09 becomes effective for annual reporting periods starting after December 15, 2025. The Company anticipates that the adoption of this standard will not significantly impact its financial position, results of operations, or cash flows. In November 2023, the Financial Accounting Standards Board (FASB) released ASU 2023-07, titled “Enhancements to Reportable Segment Disclosures” (“ASU 2023-07”). This standard necessitates companies to provide additional, more comprehensive details regarding significant expenses of a reportable segment, even if there is only one such segment. Its purpose is to enhance disclosures related to a public entity’s reportable segments. ASU 2023-07 will be effective for fiscal years commencing after December 15, 2023, and for interim periods starting after December 15, 2024, with the option for early adoption. We are presently assessing the potential impact of adopting ASU 2023-07 on our consolidated financial statements.
The management does not believe that other than disclosed above, the recently issued but not yet adopted accounting pronouncements will have a material impact on its financial position results of operations or cash flows.
| F-10 |
Note 3 - Going Concern
The
accompanying consolidated financial statements were prepared on a going concern basis, which contemplates the realization of assets and
the satisfaction of obligations in the normal course of business. However, the Company has suffered recurring losses from operations
since inception, resulting in an accumulated deficit of $
In view of these matters, continuation as a going concern is dependent upon several factors, including the availability of debt or equity funding upon terms and conditions acceptable to the Company and ultimately achieving profitable operations. Management believes that the Company’s business plan provides it with an opportunity to continue as a going concern. However, management cannot provide assurance that the Company will meet its objectives and be able to continue in operation.
The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of Forge Innovation Development Corp. to continue as a going concern.
Note 4 – Real Estate Investments
On
March 24, 2023, the Company acquired
December 31, 2023 | December 31, 2022 | |||||||
| Commercial building | $ | $ | ||||||
| Tenant improvements | ||||||||
| Construction in progress | ||||||||
| Land | ||||||||
| Total real estate investments, at cost | ||||||||
| Less: accumulated depreciation | ( | ) | ||||||
| Total real estate investments, net | $ | $ | ||||||
Note 5 – Property and equipment, net
Property and equipment, net, as of December 31, 2023 and 2022, consisted of following:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Furniture | $ | $ | ||||||
| Equipment | ||||||||
| Vehicle | ||||||||
| Computers | ||||||||
| Total property and equipment | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
During
the years ended December 31, 2023 and 2022, depreciation expenses were $
Note 6 - Concentration of Risk
The
Company maintains cash in two accounts within two local commercial banks located in Southern California. The standard insurance amount
is $
For
the year ended December 31, 2023, the Company generate revenue of
| F-11 |
Note 7 - Related Party Transactions
As of December 31, 2023 and 2022, the amounts due to related parties consisted of the following:
| Party | Nature of relationship | December 31, 2023 | December 31, 2022 | |||||||
| Patrick Liang (“Patrick”) | CEO of the Company | $ | $ | |||||||
| Hua Guo | Officer of Legend LP and Patrick’s mother | |||||||||
| Xiaohui Deng | Member of Legend LP | |||||||||
| Xingyu Liu | Member of Legend LP | |||||||||
| Glory Investment International Inc. (“Glory”) | Entity controlled by Patrick’s mother | |||||||||
| Prime Investment International Inc. (“Prime”) | Entity controlled by Patrick’s mother | |||||||||
| University Campus Hotel LP (“University”) | Entity controlled by Patrick’s mother | |||||||||
| Speedlight Consulting (“Speedlight”) | Entity controlled by a former director, appointed on November 2020 and resigned on January 11, 2023 | |||||||||
| $ | $ | |||||||||
The
amounts due to related parties are unsecured, non-interest-bearing and due on demand. During the years ended December 31, 2023 and 2022,
these related parties paid expenses on behalf of the Company in the total amount of $
As of December 31, 2023, $
On
January 4, 2021, the Company purchased a vehicle from Patrick Liang, the President of the Company, for daily business operation, in the
amount of $
On April 2, 2022, the Company entered into a property
management agreement (“PMA”) with Legend International Investment, LP. (the “Legend LP”), a previous related party
of the Company and currently a subsidiary of the Company, of which the management is related to Mr. Patrick Liang, President and CEO of
the Company. Pursuant to the PMA, the Company will manage the properties owned by Legend LP, which is called Mission Marketplace; a grocery
anchored shopping center (the “Property”) located at 6240 Mission Boulevard in Jurupa Valley, California. The Property contains
two, one-story and one, two-story buildings containing
On
July 15, 2022, the Company traded its Mazda vehicle with Longo Toyota to exchange a 2022 Toyota Mirai. The total purchase price for the
2022 Toyota Mirai is $
| F-12 |
Note 8 - Commercial and SBA Loans
| December 31, | December 31, | |||||||
| Party | 2023 | 2022 | ||||||
| Chase auto loan (Note 7) | $ | $ | ||||||
| SBA Loan (a) | ||||||||
| Third party individual (b) | ||||||||
| Third party entity A (c) | ||||||||
| Third party entity B (d) | ||||||||
| Third party entity C (e) | ||||||||
| Total commercial loans | ||||||||
| Less: current portion | ( | ) | ( | ) | ||||
| Non-current portion | $ | $ | ||||||
| a. |
| b. |
| c. |
| d. |
| e. |
| F-13 |
Note 9 – Acquisition of Legend
On
March 23, 2023, the Company acquired
The following table presents the allocation of the consideration transferred to the assets acquired and liabilities assumed based on their book values.
| Allocation | ||||
| Total purchase consideration | $ | |||
| Book value of non-controlling interests | ||||
| Total consideration | ||||
| Identifiable net assets acquired: | ||||
| Cash | $ | |||
| Account receivable | ||||
| Prepaid expenses and other | ||||
| Real estate investments | ||||
| Accounts payable and accrued liabilities | ( | ) | ||
| Security deposits payable | ( | ) | ||
| Unearned revenue | ( | ) | ||
| Loans to related parties | ( | ) | ||
| Loans, current | ( | ) | ||
| Net assets acquired | ||||
| Gain on bargain purchase | $ | ( | ) | |
Given
the nature of Legend’s operations, substantially all revenue and expenses incurred at the beginning of the month. Considering the
short period of 7 days from acquisition date to the quarter end, upon agreement with Legend LLC, the Company would start to consolidate
the operation results of Legend from April 1, 2023. From April 1, 2023 to December 31, 2023, the Company recognized net loss of $
Note 10 - Income Taxes
The Company has not recognized an income tax benefit for its operating losses generated based on uncertainties concerning its ability to generate taxable income in future periods. The tax benefit for the period presented is offset by a valuation allowance established against deferred tax assets arising from the net operating losses, the realization of which could not be considered more likely than not. In future periods, tax benefits and related deferred tax assets will be recognized when management considers realization of such amounts to be more likely than not. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years.
As
of December 31, 2023 and 2022, the Company has incurred an accumulated net loss of approximately $
December 31, 2023 | December 31, 2022 | |||||||
| Deferred tax asset: | ||||||||
| Net operating loss at statutory rates | $ | |||||||
| Depreciation expense | ( | ) | ( | ) | ||||
| Total deferred tax asset | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | |||||||
| F-14 |
The reconciliation of the effective income tax rate to the federal statutory rate is as follows:
December 31, 2023 | December 31, 2022 | |||||||
| Federal income tax rate | % | % | ||||||
| Increase in valuation allowance | ( | )% | ( | )% | ||||
| Effective income tax rate | % | % | ||||||
The Company has evaluated and concluded that there are no significant uncertain tax positions requiring recognition in its consolidated financial statements. In the normal course of business, the Company is subject to examination by taxing authorities. With few exceptions, the Company is no longer subject to U.S. federal income tax examinations for years before 2017.
The Company may from time to time be assessed interest or penalties by major tax jurisdictions. In the event it receives an assessment for interest and/or penalties, it will be classified in the consolidated financial statements as tax expense.
Note 11 – Stockholders’ Equity
As of December 31, 2023 and 2022, the Company had and shares of common stock issued and outstanding, respectively.
On March 24, 2023, the Company issued shares of common stock to complete the acquisition of Legend (Note 9).
2023 Equity Incentive Plan
On June 15, 2023, the Board of the Company adopted an equity incentive plan to increase stockholder value and to advance the interests of the Company by furnishing a variety of economic incentives (“Incentives”) designed to attract, retain and motivate employees, certain key consultants and directors of the Company. Incentives may consist of opportunities to purchase or receive shares of Common Stock, $ par value, of the Company (“Common Stock”) on terms determined under this plan (the “2023 Equity Incentive Plan”). Under the 2023 Equity Incentive Plan, the Company can issue up to shares of common stocks of the Company. Incentives may be granted in any one or a combination of: (a) incentive stock options and non-statutory stock options; (b) stock appreciation rights; (c) stock awards; (d) restricted stock; and (e) performance shares. Such incentives may be subject to vesting conditions determined by the Board of Directors at grant. The maximum term of options or other stock-based award granted is ten years or such lesser time as determined by the Board of Directors at the time of grant.
On
June 26, 2023, the Company granted a total of
shares of common stock of the Company to four consultants for one-year consulting services, pursuant to the Company’s 2023
Equity Incentive Plan. The fair value of the shares granted was valued in the amount of $
(i.e. $ per share) at the grant date. For the year ended December 31, 2023, the Company recognized share-based compensation in
the amount of $
and the deferred share-based compensation totaled $
As of December 31, 2023, the Company’s common stock issuable under the 2023 Equity Incentive Plan totaled shares.
Note 12 – Contingencies
On
December 8, 2017, the Company entered into a lease agreement with Puente Hills Business Center II, L.P. (“PHBC-II”) for a
lease term of , and which was scheduled to expire on
Note 13 – Subsequent event
The Company has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission, and noted the subsequent event below:
On April 15, 2024, Legend LP refinanced its Property
by securing a new promissory note (the “New Note”) in the totaling $
| F-15 |
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.
Not Applicable.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed with an objective of ensuring that information required to be disclosed in our periodic reports filed with the Securities and Exchange Commission, such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. Disclosure controls are also designed with an objective of ensuring that such information is accumulated and communicated to our management, including our chief executive officer, in order to allow timely consideration regarding required disclosures.
The evaluation of our disclosure controls by our principal executive officer included a review of the controls’ objectives and design, the operation of the controls, and the effect of the controls on the information presented in this Annual Report. Our management, including our Chief Executive Officer, does not expect that disclosure controls can or will prevent or detect all errors and all fraud, if any. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Also, projections of any evaluation of the disclosure controls and procedures to future periods are subject to the risk that the disclosure controls and procedures may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including 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) of the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that there were significant deficiency in our internal controls over Financial reporting as of December 31, 2023 and they were therefore not as effective as they could be to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The significant deficiency in our controls and procedure were lack of evidences for proper approval and review of disbursements. Management does not believe that any of these significant deficiencies materially affected the results and accuracy of its consolidated financial statements. However, in view of this discovery of such weaknesses, management has begun a review to improve them.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company in accordance with as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the (i) effectiveness and efficiency of operations, (ii) reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles, and (iii) compliance with applicable laws and regulations. Our internal controls framework is based on the criteria set forth in the Internal Control - Integrated Framework that was issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management identified a lack of segregation of duties.
Management’s assessment of the effectiveness of the small business issuer’s internal control over financial reporting is as of the year ended December 31, 2023. We believe that internal controls over financial reporting as set forth above shows material weaknesses and are not effective. We have identified material weaknesses considering the nature and extent of our current operations and any risks or errors in financial reporting under current operations.
This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this annual report.
Subsequent to the end of the period covered by this report, and in light of the weakness described above, management is in the process of designing and implementing improvements in its internal control over financial reporting and we currently plan tom hire an independent third-party consultant to assist in identifying and determining the appropriate accounting procedures and controls to implement.
Item 9B. Other Information.
Not applicable.
| 10 |
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth the names and ages of the current directors and executive officers of the Company, the principal offices and positions with the Company held by each person and the date such person became a director or executive officer of the Company. The executive officers of the Company are elected annually by the Board of Directors. The directors serve one-year terms until their successors are elected. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors.
The following table sets forth information regarding the members of the Company’s board of directors and its executive officers:
| Name | Age | Position | Year Commenced | |||
| Patrick Liang | 40 | President, CEO, CFO and Director | 2016 | |||
| Hengjiang Pang (1) | 43 | Former Director | 2020 |
(1) Mr. Pang resigned as a Director of the Company on January 11, 2023.
Directors serve until the next annual meeting and until their successors are elected and qualified. Officers are appointed to serve for one year until the meeting of the board of directors following the annual meeting of stockholders and until their successors have been elected and qualified.
Patrick Liang- President, CEO, CFO and Director since April 2016. Mr. Liang has transitioned over to the Company from Finisar Corp., from May 2015 until April 2016, where Mr. Liang was in charge of MES (Manufacturing Executive System), Operation Support and Head Industry Engineer. Mr. Liang’s responsibilities were supporting the company’s MES system, which included but were not limited to: Forecasting the company’s capacity, calculate the yield rate and HPU, UPU system in order to optimize the performance of production assembly; Using Camstar’s Insite system to trace and track the production in order to monitor the assembly line’s real time assembly performance and understanding the detail assembly issue such as bottle neck, yield rate low on specific processing step, production in assembly flow’s traceability and so on. Mr. Liang also has extensive experience in Parts Coordinator Supervision and worked in the Yami Seiki USA, from February 2014 until March 2015 as raw materials coordinator supervisor to which his duties included, but were not limited to: Regulating parts to provide precise information to the technician who use the parts to install or repair the CNC (Computer Numerical Controls) machine. Mr. Liang received a BS Degree in Mathematics/Math and Physical Sciences from the University of California Riverside and in 2008 a BA Degree in English and Business from the Shanghai Foreign Language University; Mr. Liang skills include familiarity with Industry’s MES system as well as Industry Engineering; Strong leadership and management capabilities; Fluent in English and Chinese (Both Mandarin and Cantonese) and expert capability with Microsoft Word, Microsoft Excel, Microsoft Power Point and Adobe Photoshop. As a founder of the Company, Mr. Liang is most familiar with the business plan and the future mission of the Company. His vision, together with his strong analytical academic background, we believe, makes him an excellent choice to be the CEO and a director of the Company.
Hengjiang Pang – Mr. Pang has nearly 18 years of finance and accounting experiences in both Asia and North America. Mr. Pang served a number of senior management roles in the companies including his 6-year tenure with HeJian Technology Co., Ltd. (subsidiary of UMC), Financial Controller of a private-equity company in Pasadena, California. Mr. Pang is also the President of Speedlight Consulting Services Inc., which is focus on the goal to assist companies going public in the USA, and maintain the public requirements from both SEC and other departments. Mr. Pang has successfully assisted several companies going public in the USA since 2016, which including the areas of real estate development, travelling business, hotel management, medical product development and hemp industry. Mr. Pang holds MBA degree from Keller Graduate School of Management at Devry University, Long Beach and a BA in Industrial Engineering from Northeastern University (China).
Term of office
All officers and directors listed above will remain in office until the next annual meeting of our stockholders, and until their successors have been duly elected and qualified or until removed from office in accordance with our bylaws. There are no agreements with respect to the election of Directors. We have not compensated our Directors for service on our Board of Directors, any committee thereof, or reimbursed for expenses incurred for attendance at meetings of our Board of Directors and/or any committee of our Board of Directors. Officers are appointed annually by our Board of Directors and each Executive Officer serves at the discretion of our Board of Directors. We do not have any standing committees. Our Board of Directors may in the future determine to pay Directors’ fees and reimburse Directors for expenses related to their activities.
None of our Officers and/or Directors have filed any bankruptcy petition, been convicted of or been the subject of any criminal proceedings or the subject of any order, judgment or decree involving the violation of any state or federal securities laws within the past five (5) years.
Director Independence
The Board currently consists of one member, Mr. Patrick Liang, and who does not meet the independence requirements of the Nasdaq Stock Market as currently in effect.
| 11 |
Committees and Terms
The Board of Directors (the “Board”) has not established any committees. The Company will notify its shareholders for an annual shareholder meeting and that they may present proposals for inclusion in the Company’s proxy statement to be mailed in connection with any such annual meeting; such proposals must be received by the Company at least 90 days prior to the meeting. No other specific policy has been adopted in regard to the inclusion of shareholder nominations to the Board of Directors.
Code of Ethics
To date, we have not adopted a Code of Ethics applicable to our principal executive officer and principal financial officer because the Company has no meaningful operations. The Company does not believe that a formal written code of ethics is necessary at this time. We expect that the Company will adopt a code of ethics if and when the Company successfully completes a business combination that results in the acquisition of an on-going business and thereby commences operations.
Item 11. Executive Compensation
Executive Compensation
The Summary Compensation Table shows certain compensation information for services rendered in all capacities for the fiscal years ended December 31, 2023, 2022 and 2021. Other than as set forth herein, no executive officer’s salary and bonus exceeded $100,000 in any of the applicable years. The following information includes the dollar value of base salaries, bonus awards, the number of stock options granted and certain other compensation, if any, whether paid or deferred.
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-equity incentive plan compensation ($) | Non-qualified deferred compensation earnings ($) | All other compensation ($) | Total ($) | |||||||||||||||||||||||||||
| Patrick Liang | 2023 | 35,000 | 35,000 | |||||||||||||||||||||||||||||||||
| President, Chief | 2022 | 60,000 | - | - | - | - | - | - | 60,000 | |||||||||||||||||||||||||||
| Executive Officer | 2021 | 60,000 | - | - | - | - | - | - | 60,000 | |||||||||||||||||||||||||||
Hengjiang Pang (1) | 2023 | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
| Director | 2022 | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
| 2021 | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||
| (1) | Mr. Pang resigned as a Director of the Company on January 11, 2023. |
Employment Agreements
The Company has not entered into employment agreements with any of its employees or officers as of December 31, 2023.
Stock Equity Plan
A total of 5,000,000 shares of common stock are authorized to be issuable to employees, consultants, and directors of the Company under our 2023 Equity Incentive Plan which was approved by our Board of Directors on June 15, 2023. On June 26, 2023, the Company granted a total of 2,800,000 shares of common stock of the Company to four consultants for one-year consulting services, pursuant to the Company’s 2023 Equity Incentive Plan. The fair value of the shares granted was valued in the amount of $1,960,000 at the grant date. For the year ended December 31, 2023, the Company recognized share-based compensation in the amount of $1,031,014. As of December 31, 2023, the deferred share-based compensation totaled $928,986.
As of December 31, 2023, the Company’s common stock issuable under the 2023 Equity Incentive Plan totaled 2,200,000 shares.
Employee Pension, Profit Sharing or other Retirement Plans
We do not have a defined benefit, pension plan, profit sharing or other retirement plan, although we may adopt one or more of such plans in the future.
| 12 |
Item 12. Security Ownership of Certain Beneficial Owners and Management and related Stockholder Matters
The following table sets forth information as of December 31, 2023 regarding the beneficial ownership of the Company’s common stock by each of its executive officers and directors, individually and as a group and by each person who beneficially owns in excess of five percent of the common stock after giving effect to any exercise of warrants or options held by that person.
| Name and Address of Beneficial Owner (3) | Position | Amount of Shares Beneficial Owned | Percent of class (1) | |||||||
| Patrick Liang (3) | President, CEO, CFO and Director | 37,184,843 | (2) | 73.80 | % | |||||
| Hengjiang Pang (4) | Former Director | 2,800,600 | (5) | 5.56 | % | |||||
| Officers and Directors as a Group (1) | 37,184,843 | 73.80 | % | |||||||
| (1) | Based upon 50,389,011 shares outstanding as of April 15, 2024. |
| (2) | Includes 10,000 shares owned by Mr. Liang’s wife. |
| (3) | The addresses of the officers and directors of the Company is 6280 Mission Blvd Unit 205, Jurupa Valley, CA 92509. |
| (4) | Mr. Pang resigned as a Director of the Company on January 11, 2023. |
| (5) | Includes 2,800,400 shares owned by Mr. Pang’s wife. |
Item 13. Certain Relationships and Related Transactions
As of December 31, 2023 and 2022, the amounts due to related parties consisted of the following:
| Party | Nature of relationship | December 31, 2023 | December 31, 2022 | |||||||
| Patrick Liang (“Patrick”) | CEO of the Company | $ | 364 | $ | - | |||||
| Hua Guo | Officer of Legend LP and Patrick’s mother | 53,000 | - | |||||||
| Xiaohui Deng | Member of Legend LP | 50,000 | - | |||||||
| Xingyu Liu | Member of Legend LP | 100,000 | - | |||||||
| Glory Investment International Inc. (“Glory”) | Entity controlled by Patrick’s mother | 161,500 | - | |||||||
| Prime Investment International Inc. (“Prime”) | Entity controlled by Patrick’s mother | 300,451 | - | |||||||
| University Campus Hotel LP (“University”) | Entity controlled by Patrick’s mother | 191,000 | - | |||||||
| Speedlight Consulting Services Inc (“Speedlight”) | Entity controlled by a former director, appointed on November 2020 and resigned on January 11, 2023 | 70,500 | 60,000 | |||||||
| $ | 926,815 | $ | 60,000 | |||||||
The amounts due to related parties are unsecured, non-interest-bearing and due on demand. During the years ended December 31, 2023 and 2022, these related parties paid expenses on behalf of the Company in the total amount of $9,980 and $4,809, respectively. Advances received from these related parties totaled $364,575 in 2023, and the Company repaid a total of $176,273. $658,000 due to the three entities controlled by our CEO’s mother, was assumed by acquisition of Legend LP on March 24, 2023.
| 13 |
As of December 31, 2023, $33 has not been paid and was included in the amount due to related parties on the consolidated balance sheet. For the years ended December 31, 2023 and 2022, the Company paid professional fee of $48,400 and $39,200, respectively, to Speedlight. The amount due to Speedlight represents the professional fee which has not been paid as of December 31, 2023 and 2022.
On January 4, 2021, the Company purchased a vehicle from Patrick Liang, the President of the Company, for daily business operation, in the amount of $22,861, which equaled to the remaining vehicle loan balance with 7.11% interest rate annum for a period of 41 months and monthly installment of $558.
On April 2, 2022, the Company entered into a property management agreement (“PMA”) with Legend International Investment, LP. (the “Legend LP”), a previous related party of the Company and currently a subsidiary of the Company, of which the management is related to Mr. Patrick Liang, President and CEO of the Company. Pursuant to the PMA, the Company will manage the properties owned by Legend LP, which is called Mission Marketplace; a grocery anchored shopping center (the “Property”) located at 6240 Mission Boulevard in Jurupa Valley, California. The Property contains two, one-story and one, two-story buildings containing 48,722 total square foot of gross leasable area situated on a 4.51-acre site. The original monthly service charge was $5,000 which was amended to $10,000 per month in June 2022 due to Legend LP required additional management services for their properties. On November 17, 2022, the monthly service charge was amended to $15,000 due to new tenants moving in and additional management services desired. During the years ended December 31, 2023 and 2022, the Company recognized property management income from Legend LP in the amount of $107,000 and 180,000, respectively. The decrease was mainly due to the acquisition of Legend LP, which eliminated to recognize property management income from Legend LP as intercompany transaction for the period started from April to December in 2023.
On July 15, 2022, the Company traded its Mazda vehicle with Longo Toyota to exchange a 2022 Toyota Mirai. The total purchase price for the 2022 Toyota Mirai is $84,406 and the loan amount is $48,295 by deducting the value of the trade-in Mazda vehicle and the rebate from the manufacturer. The monthly installment amount is $671 with 0% APR and a payment term of 72 months. Along with the transaction, we received a $15,000 Hydrogen subsidy card for the compensation for the purchase of new energy automobile. We recorded the subsidy as prepaid expense and unearned revenue to amortize on a straight-line basis over the estimate useful life of four years started on the purchase date. As a result of the trade-in transaction, $6,874 gain on disposal was recognized for the year ended December 31, 2022. During the year ended December 31, 2023, the Company made loan payment of $8,048. As of December 31, 2023 and 2022, the current portion of the Chase auto loan totaled $8,048 and $8,049, respectively, which was included in loans, current on the consolidated balance sheets.
Item 14. Principal Accountant Fees and Services.
During 2023 and 2022, Simon & Edward, LLP, the Company’s independent auditors have billed for their services as set forth below. In addition, fees and services related to the audit of the consolidated financial statements of the Company for the period ended December 31, 2023, as contained in this Report, are estimated and included for the fiscal year ended December 31, 2022.
| Year ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Audit Fees | $ | 17,000 | $ | 9,500 | ||||
| Audit-Related Fees | $ | -0- | $ | -0- | ||||
| Tax Fees | $ | 1,760 | $ | 1,200 | ||||
| All Other Fees | $ | -0- | $ | -0- | ||||
Pre-Approval Policy
Our Board as a whole pre-approves all services provided by Simon & Edward, LLP. For any non-audit or non-audit related services, the Board must conclude that such services are compatible with the independence as our auditors.
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PART IV
Item 15. Exhibits; Financial Statement Schedules.
| 101.INS** | Inline XBRL Instance Document |
| 101.SCH** | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL** | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF** | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB** | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE** | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| * | Incorporated by reference to the Company’s Registration Statement on Form S-1 as filed with the SEC on May 25, 2017. |
| ** | Filed herewith |
| 15 |
SIGNATURES
In accordance with the Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 2nd day of August, 2024.
| FORGE INNOVATION DEVELOPMENT CORP. | ||
| By: | /s/ Patrick Liang | |
Patrick Liang, Chief (Principle) Executive Officer | ||
In accordance with the requirements of the Securities and Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities indicated and on the dates stated.
| /s/ Patrick Liang | Dated: August 2, 2024 | |
| Patrick Liang | ||
Chief Executive Officer, President, Chief Financial Officer and Director |
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EXHIBIT INDEX
| 101.INS** | Inline XBRL Instance Document |
| 101.SCH** | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL** | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF** | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB** | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE** | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| * | Incorporated by reference to the Company’s Registration Statement on Form S-1 as filed with the SEC on May 25, 2017. |
| ** | Filed herewith |
| 17 |