GFLT 10-Q
GenFlat Holdings, Inc. (GFLT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C., 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended:
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number:
| (Exact Name of Registrant as Specified in its Charter) |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, including
Area Code:
Securities registered pursuant to Section 12(b) of the Exchange Act: None
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
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 check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: shares of common stock as of February 6, 2025.
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GenFlat Holdings, Inc.
Consolidated Balance Sheets
(Unaudited)
| December 31, 2024 | June 30, 2024 | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right of use asset, operating lease | ||||||||
| Intangible assets, net | ||||||||
| Rental inventory, net | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders' Equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Notes payable – related party, current | ||||||||
| Note payable - current | ||||||||
| Related party advances | ||||||||
| Right of use liability, operating lease, current | ||||||||
| Total current liabilities | ||||||||
| Notes payable | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders' Equity: | ||||||||
| Common stock, $ par value shares authorized, and shares issued and outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Subscription payable | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders' equity attributable to GenFlat Holdings, Inc. | ||||||||
| Noncontrolling interest | ||||||||
| Total stockholders’ equity | ||||||||
| Total Liabilities and Stockholders' Equity | $ | $ | ||||||
See accompanying notes to the unaudited consolidated financial statements.
| 3 |
GenFlat Holdings, Inc.
Consolidated Statements of Operations
(Unaudited)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross profit | ( | ) | ( | ) | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Noncontrolling interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to GenFlat Holdings, Inc. | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share – basic and diluted attributable to GenFlat Holdings, Inc | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Loss per share - basic and diluted attributable to noncontrolling interest. | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average common shares outstanding - basic and diluted | ||||||||||||||||
See accompanying notes to the unaudited consolidated financial statements.
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GenFlat Holdings, Inc.
Consolidated Statements of Stockholders' Equity
For the Periods Ended December 31, 2024 and 2023
(Unaudited)
| Common Stock | Paid In | Stock | Accumulated | Noncontrolling | ||||||||||||||||||||||||||||
| Shares | Amount | Capital | Payable | Deficit | Total | Interest | Total | |||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| Common stock sold for cash | ||||||||||||||||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance, September 30, 2023 | ( | ) | ||||||||||||||||||||||||||||||
| Common stock sold for cash | ||||||||||||||||||||||||||||||||
| Recapitalization | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Reclassification of noncontrolling interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| Common stock sold for cash | ||||||||||||||||||||||||||||||||
| Stock-based compensation | – | |||||||||||||||||||||||||||||||
| Net Loss | – | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, September 30, 2024 | – | ( | ) | |||||||||||||||||||||||||||||
| Common stock sold for cash | ||||||||||||||||||||||||||||||||
| Stock-based compensation | – | |||||||||||||||||||||||||||||||
| Net Loss | – | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
See accompanying notes to the unaudited consolidated financial statements.
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GenFlat Holdings, Inc.
Consolidated Statements of Cash Flows
For the Six Months Ended December 31, 2024 and 2023
(Unaudited)
| December 31, 2024 | December 31, 2023 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization expense | ||||||||
| Stock-based compensation expense | ||||||||
| Rental inventory – depreciation expense | ||||||||
| Amortization of right of use assets | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Right of use asset | ||||||||
| Rental inventory | ( | ) | ( | ) | ||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Right of use liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Capitalized patent costs | ||||||||
| Purchases of property and equipment | ||||||||
| Net cash used in investing activities | ||||||||
| Cash Flows from Financing Activities: | ||||||||
| Repayment on notes payable | ( | ) | ||||||
| Repayment of line of credit | ( | ) | ||||||
| Repayment of related party advances | ( | ) | ||||||
| Repayment of notes payable – related party | ( | ) | ||||||
| Proceeds from note payable | ||||||||
| Proceeds from notes payable – related party | ||||||||
| Proceeds from sale of common stock | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ||||||||
| Cash, at beginning of period | ||||||||
| Cash, at end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
See accompanying notes to the unaudited consolidated financial statements.
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GenFlat Holdings, Inc.
Notes to Consolidated Financial Statements
For the period ended December 31, 2024
(Unaudited)
NOTE 1. NATURE OF BUSINESS AND GOING CONCERN
On September 9, 2019 (commencement of operations), GenFlat Holdings, Inc. (formerly Healthcare Business Resources Inc.), a domestic corporation was organized in Delaware to provide consulting services to healthcare organizations. Unless the context otherwise requires, all references to “GenFlat” “Company,” “we,” “our” or “us” and other similar terms means GenFlat Holdings, Inc. (formerly Healthcare Business Resources Inc.), and its subsidiaries.
On October 18, 2023, the Company entered into a Share Exchange Agreement (“Share Exchange Agreement”) with GenFlat, Inc. (“GenFlat, Inc.”), a Delaware corporation, and GenFlat, Inc. shareholders who owned 97.1% of the outstanding shares of common stock of GenFlat, Inc. Pursuant to the Share Exchange Agreement, all GenFlat, Inc. shareholders who are parties to the Share Exchange Agreement will receive ninety eight percent (98%) of the issued and outstanding shares of common stock of the Company in exchange for their shares of GenFlat, Inc. common stock on a pro rata basis.
As a result of the closing of the Share Exchange Agreement, the Company discontinued all aspects of its health care consulting business, and the Company is now focused on developing the GenFlat business plan. GenFlat is a start-up company that developed a more sustainable collapsible marine container, replacing traditional standard marine containers. GenFlat operates as a container sales and leasing company and supplies GenFlat’s patented marine container primarily to shipping line customers under a variety of short and long-term lease structures. In accordance with “reverse acquisition” accounting treatment, the historical financial statements of GenFlat, Inc. as of period ends, and for periods ended, prior to the acquisition became the historical financial statements of the Company in all future filings with the SEC, and the Company’s fiscal year end became June 30. All prior period information presented within this filing is of GenFlat, Inc. historical operations. The Company changed its name from Healthcare Business Resources Inc. to GenFlat Holdings, Inc. to better reflect its new business operations.
Unless the context otherwise requires, all references to “GenFlat” “Company,” “we,” “our” or “us” and other similar terms means GenFlat Holdings, Inc. (formerly Healthcare Business Resources Inc.), and its subsidiaries.
Liquidity and Going Concern
These consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. As of December 31, 2024 the Company had not yet achieved consistent profitable operations and expects to incur further losses in the development of its business, all of which raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has initiated a formal sales and marketing plan including direct email campaigns, industry events, and business-to-business digital advertising to generate sales. The Company also intends to continue to raise funds through an equity offering to meet the capital requirements to manufacturer its products. However, there is no assurance of additional funding being available through these plans or other sources.
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NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United Stated of America (“U.S. GAAP”) and, as such, include amounts based on judgments, estimates, and assumptions made by management that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The accompanying interim consolidated financial statements include the accounts of the Company and its majority owned subsidiary, GenFlat, Inc, and its wholly-owned subsidiaries Collapsible Revolution, LLC, and Sub Oceanic Genflat LLC. All intercompany accounts, transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, demand deposits with banks and liquid investments with an original maturity of three months or less.
Rental Inventory
Rental inventory consists of collapsible marine shipping containers. Rental inventory is stated at cost, net of related discounts, with an estimated useful life of 10 years. Generally, when rental equipment is acquired, the Company estimates the period that it will hold the asset, primarily based on historical measures of the amount of rental activity (e.g. equipment usage) and the targeted age of equipment at the time of disposal. The Company also estimates the residual value of the applicable rental equipment at the expected time of disposal. The residual value for rental equipment is affected by factors which include equipment age and amount of usage. Depreciation is recorded over the estimated holding period. Depreciation rates are reviewed on a quarterly basis based on management's ongoing assessment of present and estimated future market conditions, their effect on residual values at the time of disposal and the estimated holding periods. Market conditions for used equipment sales can also be affected by external factors such as the economy, natural disasters, fuel prices, supply of similar used equipment, the market price for similar new equipment and incentives offered by manufacturers of new equipment. These key factors are considered when estimating future residual values and assessing depreciation rates. As a result of this ongoing assessment, the Company makes periodic adjustments to depreciation rates of rental equipment in response to changed market conditions.
Long-Lived Assets
The Company amortizes acquired definite-lived intangible assets over their estimated useful lives. Other indefinite-lived intangible assets are not amortized but subject to annual impairment tests. In accordance with ASC 360 “Property Plant and Equipment,” the Company reviews the carrying value of intangibles subject to amortization and long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
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Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.
Impairment of Long-lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.
Revenue Recognition
The Company is principally engaged in the business of renting equipment. Equipment rental revenue includes revenue generated from renting equipment to customers and is recognized on a straight-line basis over the length of the rental contract. As part of this straight-line methodology, when the equipment is returned, the Company recognizes as incremental revenue the excess, if any, between the amount the customer is contractually required to pay, which is based on the rental contract period applicable to the actual number of days the equipment was out on rent, over the cumulative amount of revenue recognized to date. In any given accounting period, the Company will have customers return equipment and be contractually required to pay more than the cumulative amount of revenue recognized to date under the straight-line methodology. Also included in equipment rental revenue is re-rent revenue in which the Company will rent specific pieces of equipment from vendors and then re-rent that equipment to its customers. Provisions for discounts, rebates to customers and other adjustments are provided for in the period the related revenue is recorded.
The Company’s sale of rental and new equipment, parts and supplies to customers are recognized under ASC Topic 606, Revenue from Contracts with Customers, ("Topic 606"). The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. The amount of revenue recognized reflects the consideration the Company expects to be entitled to in exchange for such products or services.
In accordance with ASC 260 “Earnings per Share,” basic net loss per common share is computed by dividing net loss for the period by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of common and common equivalent shares, such as stock options and warrants, outstanding during the period. Such common equivalent shares have not been included in the computation of net loss per share as their effect would be anti-dilutive.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, which requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.
Tax benefits of uncertain tax positions are recorded
only where the position is “more likely than not” to be sustained based on their technical merits. The amount recognized is
the amount that represents the largest amount of tax benefit that is greater than 50% likely of being ultimately realized. A liability
is recognized for any benefit claimed or expected to be claimed, in a tax return in excess of the benefit recorded in the financial statements,
along with any interest and penalty (if applicable) in such excess. The Company has
| 9 |
Fair Value of Financial Instruments
The carrying value of short-term instruments, including cash, accounts receivable, rental inventory, prepaid expenses, accounts payable and accrued expenses, and notes payable approximate fair value due to the relatively short period to maturity for these instruments.
Fair value is defined 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. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a three-level valuation hierarchy for disclosures of fair value measurements, defined as follows:
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value.
The Company does not have any assets or liabilities that are required to be measured and recorded at fair value on a recurring basis.
Stock-Based Compensation
Accounting Standards Codification (“ASC”) 718, “Accounting for Stock-Based Compensation” established financial accounting and reporting standards for stock-based compensation plans. It defines a fair value-based method of accounting for an employee stock option or similar equity instrument. Accordingly, employee share-based payment compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period. The valuation of employee stock options is an inherently subjective process, since market values are generally not available for long-term, non-transferable employee stock options. Accordingly, the Black-Scholes option pricing model is utilized to derive an estimated fair value. The Black-Scholes pricing model requires the consideration of the following six variables for purposes of estimating fair value:
Expected Dividends. We have never declared or paid any cash dividends on any of our capital stock and do not expect to do so in the foreseeable future. Accordingly, we use an expected dividend yield of zero to calculate the grant-date fair value of a stock option.
Expected Volatility. The expected volatility is a measure of the amount by which our stock price is expected to fluctuate during the expected term of options granted. We determine the expected volatility solely based upon the historical volatility of a peer group of companies of similar size and with similar operations.
Risk-Free Interest Rate. The risk-free interest rate is the implied yield available on U.S. Treasury zero-coupon issues with a remaining term equal to the option’s expected term on the grant date.
Expected Term. The expected life of stock options granted is based on the actual vesting date and the end of the contractual term.
Stock Option Exercise Price and Grant Date Price of Common Stock. Currently the Company utilizes the most recent cash sale price of its common stock as the most reasonable indication of fair value.
| 10 |
The Company accounts for compensation cost for stock option plans and for share based payments to non-employees in accordance with ASC 505, “Accounting for Equity Instruments Issued to Non-Employees for Acquiring, or in Conjunction with Selling, Goods or Services”. Share-based awards to non-employees are expensed over the period in which the related services are rendered at their fair value.
Research and Development Costs
Research and development costs are expensed as incurred.
Leases
The Company accounts for leases under ASC 842 - Leases. The Company determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of obligations under operating leases, and obligations under operating leases, non-current on our balance sheets.
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date, adjusted by the deferred rent liabilities at the adoption date. Short-term leases of one year or less are not recognized as ROU assets and liabilities. If our leases do not provide an implicit rate, we use our estimated incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term.
Recent Accounting Pronouncements
The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying consolidated financial statements.
NOTE 3. INTANGIBLE ASSETS, NET
On March 26, 2021, the Company acquired a group
of patents related to the container design and functionality for a purchase price of $
The following table represents the balances of intangible assets as of December 31, 2024 and June 30, 2024:
| Schedule of intangible assets | Estimated life | December 31, 2024 | June 30, 2024 | |||||||
| Patent costs | $ | $ | ||||||||
| Accumulated Amortization | ( | ) | ( | ) | ||||||
| Net Intangible | $ | $ | ||||||||
During the six months ended December 31, 2024
and 2023, the Company recognized amortization expense of $
| 11 |
NOTE 4. RENTAL INVENTORY, NET
During the year ended June 30, 2024, the Company developed and built its collapsible containers and actuators used to collapse the marine containers. During the period ended December 31, 2024, the Company developed and built its Genny’s used to collapse the marine containers. The containers, actuators and Genny’s purchased are recognized as rental inventory and are depreciated over their estimated useful lives.
As of December 31, 2024 and June 30, 2024, rental inventory consists of the following:
| Schedule of rental inventory | Estimated life | December 31, 2024 | June 30, 2024 | |||||||
| Collapsible Containers | $ | $ | ||||||||
| Actuators | ||||||||||
| Inventory in development | ||||||||||
| Accumulated Depreciation | ( | ) | ( | ) | ||||||
| Rental Inventory, net | $ | $ | ||||||||
Depreciation on rental inventory of $
NOTE 5. LEASES
The Company maintains an operating lease for its
office space with an entity controlled by the Company’s CEO Drew Hall. The lease has a remaining term of 4 months. The Company determines
if an arrangement is a lease at inception. As the rate implicit in each lease is not readily determinable, the Company uses its incremental
borrowing rate based on information available at commencement to determine the present value of the lease payments. Right-of-use assets
and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Leases with
an initial term of 12 months or less (“short-term leases”) are not recorded on the balance sheet and are recognized on a straight-line
basis over the lease term. The amount of right-of-use assets and lease liabilities were $
| Lease cost table | Operating Lease | Remaining Term in Years | ||||||
| 2025 | ||||||||
| 2026 | ||||||||
| Total lease payments | ||||||||
| Less: imputed interest | ( | ) | ||||||
| Present value of lease liability | ||||||||
On January 3, 2025, the Company extended the operating lease for its office space to expire on January 31, 2026, and agreed to pay $1,320 on a monthly basis.
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NOTE 6. DEBT
Notes Payable
On March 26, 2021, the Company entered into a
promissory note agreement with a third party for a total principal of $
On July 30, 2024, the Company entered into a promissory note agreement for a total principal of $. The Company will pay % per annum, until the total principal is paid in full. The note has no maturity date and a default interest rate of 18%. As of December 31, 2024, the balance owed on the note was $. Accrued interest on the note was $ as of December 31, 2024. In December 2024, the noteholder elected to receive shares in settlement of the principal balance. The Company issued 16,666 shares of common stock to settle the note payable in January 2025.
Note Payable – related party
During the year ended June 30, 2024, the Company
entered into three promissory note agreements with the Company’s CEO, Drew Hall, for a total principal of $
On October 1, 2024, the Company entered into a promissory note agreement with a significant shareholder for a total principal of $. The Company will pay .00% per annum, until the total principal is paid in full. The note has a maturity date of November 1, 2024 and a default interest rate of 18%. During the period ended December 31, 2024, the Company repaid a total of $ on the promissory note agreements and $ of accrued interest. As of December 31, 2024, the balance owed on the note was $.
NOTE 7. STOCKHOLDERS’ EQUITY
On September 8, 2023, the stockholders of Healthcare Business Resources Inc. approved an amendment (the “Amendment”) to Healthcare Business Resources Inc.’s Certificate of Incorporation to increase the total number of shares of common stock that it shall have authority to issue from shares to shares. The Amendment was filed with the Secretary of the State of Delaware and became effective on October 16, 2023.
Effective May 17, 2024, the Company effected a
reverse split of its common stock at a ratio of
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On November 4, 2024, the Company entered into
a financing engagement agreement with a placement agent to act as the exclusive underwriter (the “Underwriter”) in connection
with a future equity offering (the “Offering”). The Underwriter shall be entitled to an underwriting discount or cash fee
equal to 7% of the gross proceeds of the Offering, a non-accountable expense reimbursement equal 1% of the gross proceeds of the Offering,
and a warrant purchase option to purchase such number of warrants equal to 7% of the total number of units sold in the offering, which
option will expire five years from the date of the Offering prospectus (the “Unit Purchase Option”). The Unit Purchase Option
shall have an exercise price equal to 115% of the offering price of the Units sold in the Offering. The Company paid the Underwriter an
advance of $
During the period ended September 30, 2024, GenFlat
sold a total of shares of its common stock in exchange for net cash proceeds of $
During the period ended December 31, 2024, GenFlat
sold a total of shares of its common stock in exchange for net cash proceeds of $
During the year ended June 30, 2024, prior to
closing of the Share Exchange, GenFlat sold a total of shares of its common stock in exchange for net cash proceeds of $
On October 18, 2023, the Company entered into the Share Exchange Agreement with GenFlat and GenFlat shareholders who owned 97.22% of the outstanding shares of common stock of GenFlat. Pursuant to the Share Exchange Agreement, all GenFlat shareholders who were parties to the Share Exchange Agreement received shares of common stock of the Company in exchange for their shares of GenFlat common stock on a pro rata basis. The Share Exchange Agreement closed on December 20, 2023. Additionally, 110,000 shares of outstanding Company common stock were canceled, resulting in shares of common stock issued and outstanding as of the closing date.
The Share Exchange was accounted for as a reverse acquisition under ASC 805 due to the change in voting control of the legal acquirer. GenFlat was determined to be the accounting acquirer. As a result of the transaction, the Company has presented the historical operations of GenFlat prior to the merger in its consolidated financial statements. The balance sheet of HBR at the date of the Share Exchange Agreement consisted of the following:
Balance sheet of HBR at date of Share Exchange Agreement
| Accounts payable | $ | |||
| Accrued interest | ||||
| Senior Secured Convertible Credit line | ||||
| Total liabilities assumed | $ |
Subsequent to the closing of the Share Exchange, the Company repaid the Senior Secured Convertible Credit Line and accrued interest in full.
As a result of the Share Exchange, the Company recognized a noncontrolling interest related to the portion of GenFlat equity held by a shareholder not party to the Share Exchange agreement, representing 2.78% of outstanding GenFlat shares prior to the merger.
Incentive Stock Options
Pursuant to the Company’s 2020 Equity Incentive Plan, as amended, no more than shares of common stock shall be available for the grant of Awards under the 2020 Equity Incentive Plan. During the terms of the Awards, the Company shall keep available at all times the number of shares of common stock required to satisfy such Awards. Shares available for future issuance under the 2020 Equity Incentive Plan is .
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The following table summarizes the stock option activity for the period ended December 31, 2024:
| Schedule of option activity | Number of Options | Weighted Average Exercise Price Per Share | ||||||
| Outstanding at June 30, 2024 | $ | |||||||
| Granted | $ | |||||||
| Exercised | $ | – | ||||||
| Cancelled and expired | $ | – | ||||||
| Forfeited and expired | $ | – | ||||||
| Outstanding at December 31, 2024 | $ | |||||||
As of December 31, 2024, there were stock options exercisable and an aggregate intrinsic value of $.
The estimated fair value of the options issued
in connection with the advisory agreements discussion in Note 9 was estimated using a Black-Scholes option pricing model and the following
assumptions: 1) dividend yield of 0%; 2) risk-free rate of 3.67-4.45%; 3) volatility of 119-122%; 4) a common stock
price of $6.00, and 5) an expected term of 6.25 years using the simplified method of calculating expected term. The estimated fair
value of the options was $
NOTE 8. RELATED PARTY TRANSACTIONS
From time to time, the Company’s CEO paid
expenses on behalf of the Company. As of December 31, 2024, and June 30, 2024, the Company owed $
In May 2022, Collapsible Revolution, LLC entered into a consulting agreement with an advisor for consulting services related to public market listing of the Company. The Company paid $20,000 in cash to the consultant and agreed to pay an additional $20,000 upon filing of a prospectus, $25,000 upon effectiveness of such prospectus, and $25,000 upon public listing of the Company’s shares of common stock. The Company also agreed to issue 10% of the outstanding common shares of the Company to the consultant. The consultant formed GenFlat, Inc. in July 2022, and was its sole officer and Director until the closing of a reverse merger. The consultant held 1,000,000 shares of common stock of the Company that were issued at par value upon formation of GenFlat. At the time of the reverse merger, the consultant resigned as a Director and Officer, and amended the consulting agreement to remove the equity consideration described above. The consultant was paid $70,000 as a transaction fee as a result of the Share Exchange between GenFlat and the Company. This consultant was also a shareholder of the Company, and the holder of the Senior Secured Line of Credit.
The Company maintains an operating lease for its
office space. The lease has a remaining term of 4 months. On January 3, 2025, the Company extended the operating lease for its office
space to expire on
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No member of management has benefited from the transactions with related parties.
During the year ended June 30, 2024, the Company
entered into three promissory note agreements with the company’s CEO, Drew Hall, for a total principal of $
On October 1, 2024, the Company entered into a promissory note agreement with a significant shareholder for a total principal of $. The Company will pay .00% per annum, until the total principal is paid in full. The note has a maturity date of November 1, 2024 and a default interest rate of 18%. During the period ended December 31, 2024, the Company repaid a total of $ on the promissory note agreements and $ of accrued interest. As of December 31, 2024, the balance owed on the note was $.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Litigation
From time to time, the Company may be subject to routine litigation, claims, or disputes in the ordinary course of business. In the opinion of management, no pending or known threatened claims, actions or proceedings against the Company are expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows. The Company cannot predict with certainty, however, the outcome or effect of any litigation, investigatory matters, or claims. There can be no assurance as to the ultimate outcome of any lawsuits and investigations.
Commitments
On July 1, 2024 and August 21, 2024, the Company entered an aggregate of seven separate Advisory Committee Member Agreements, respectively, and agreed to the following compensation in each agreement.
| a. | Cash Compensation. $5,000 annually, payable on June 30th of each year of service. | |
| b. | Equity Compensation. Stock options for 100,000 shares of Company stock. The stock options will have an exercise price of $6.00 per share and vest as follows: 1) Fifty thousand (50,000) options will vest immediately; 2) Twenty-five thousand (25,000) options on the first anniversary of the agreement, and 3) Twenty-five thousand (25,000) options on the second anniversary of the agreement, in all cases subject to continued Advisory Committee service as of such vesting dates and pursuant to the Company’s standard Non-Qualified Stock Option Award Agreement. Vested stock options must be exercised within ten (10) years of the grant date. |
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NOTE 10. SUBSEQUENT EVENTS
Management has evaluated events through February 6, 2025, the date these financial statements were available for issuance, and determined there were no events requiring disclosures, except as disclosed below.
Subsequent to December 31, 2024, the Company issued 139,044 shares related to subscriptions for $834,264 in cash received prior to December 31, 2024. The Company also received cash proceeds of $60,000 related to the sale of an additional 10,000 shares of commons stock. The Company also issued 16,666 shares in settlement of the note payable as disclosed in Note 6.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward-looking Information
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “we believe,” “we intend,” “may,” “should,” “will,” “could” and similar expressions denoting uncertainty or an action that may, will or is expected to occur in the future. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements.
Examples of forward-looking statements include:
| · | the timing of the development of future products; | |
| · | projections of costs, revenue, earnings, capital structure and other financial items; | |
| · | statements of our plans and objectives; | |
| · | statements regarding the capabilities of our business operations; | |
| · | statements of expected future economic performance; | |
| · | statements regarding competition in our market; and | |
| · | assumptions underlying statements regarding us or our business. |
The ultimate correctness of these forward-looking statements depends upon several known and unknown risks and events. We discuss our known material risks under Part I Item 1.A “Risk Factors” in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission on November 1, 2024. Many factors could cause our actual results to differ materially from the forward-looking statements. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
We caution you that actual outcomes and results may differ materially from what is expressed, implied, or forecast by our forward-looking statements. The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
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Overview
Our Company is an early-stage company that developed a more sustainable collapsible marine container (the “GenFlat Container”), replacing traditional standard marine containers. We operate as a container sales and leasing company and supply GenFlat’s patented marine container primarily to shipping line customers under a variety of short and long-term lease structures. We commenced commercial operations in May of 2024. Presently, our commercial operations consist of an equipment lease agreement to provide GenFlat Containers to one customer. The lease agreement demonstrates commercial acceptance of our GenFlat container. Our Company is also in various stages of evaluation with potential customers to lease GenFlat Containers including shipping lines, retailers, logistics companies, and the United States military. The Company also has a non-commercial proof-of-concept agreement with a freight forwarding company in the Middle East, which commenced in August 2024. In November 2024, we announce a strategic partnership with Discount Tire, one of the world’s largest tire retailers. Under the agreement, Discount Tire is utilizing GenFlat’s innovative collapsible containers to streamline tire shipments on a closed-loop route from Thailand to California.
The GenFlat Containers are manufactured by China International Mariner Containers (“CIMC”) in Dalian, China. Manufacturing and marketing of GenFlat containers commenced in September 2023.
In accordance with “reverse acquisition” accounting treatment, the historical financial statements of GenFlat as of period ends, and for periods ended, prior to the acquisition became the historical financial statements of our Company in all future filings with the SEC, and our fiscal year end is now June 30. All prior period information presented within this filing is of GenFlat, Inc. historical operations.
Commencement of Commercial Operations
We commenced commercial operations in May 2024. Presently, our commercial operations consist of an equipment lease agreement to provide GenFlat Containers to one customer. The lease agreement demonstrates commercial acceptance of our GenFlat container. Our Company is also in various stages of evaluation with potential customers to lease GenFlat Containers, including shipping lines, retailers, logistics companies, and the United States military. Our Company also has two non-commercial proof-of-concept agreements: 1) with a freight forwarding company in the Middle East, which commenced in August 2024; and 2) with Discount Tire, which commenced in November 2024.
Results of Operations for the three months ended December 31, 2024, compared to the three months ended December 31, 2023
The following discussion compares operating data for the three months ended December 31, 2024, to the data for the three months ended December 31, 2023:
| Three Months Ended December 31, | ||||||||||||||||
| 2024 | 2023 | $ Change | % Change | |||||||||||||
| Revenue | $ | – | $ | – | $ | – | 100% | |||||||||
| Cost of revenue | 52,717 | – | 52,717 | 100% | ||||||||||||
| Gross Profit | (52,717 | ) | (52,717 | ) | 100% | |||||||||||
| Research and Development | 52,000 | – | 52,000 | 100% | ||||||||||||
| General and administrative | 739,674 | 501,611 | 238,063 | 47% | ||||||||||||
| Total operating expenses | 791,674 | 501,611 | 290,063 | 58% | ||||||||||||
| Net loss from operations | $ | (844,391 | ) | $ | (501,611 | ) | $ | (342,780 | ) | 68% | ||||||
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Revenue
Revenue was $0 for the three months ended December 31, 2024, as compared to $0 for 2023.
Costs of Revenue
Costs of revenue was $52,717 for the three months ended December 31, 2024, as compared to $0 for 2023, an increase of $52,717. The cost of revenue for the three months ended December 31, 2024 related to $45,692 of depreciation expense of rental inventory and $7,025 transportation expenses of the Company’s collapsible marine container.
Research and Development Expenses
Research and development expenses were $52,000 for the three months ended December 31, 2024, as compared to $0 for 2023, an increase of $52,000, which was the result of increased engineering, consulting and research and development activity of the Company’s collapsible marine containers and related equipment.
General and Administrative Expenses
General and administrative expenses for the three months ended December 31, 2024, were $739,674, compared to $501,611 for 2023, an increase of $238,063, which was primarily related to an increase in compensation expense, salaries, and benefits, consulting and marketing and advertising-related expenses, and other professional fees.
Results of Operations for the six months ended December 31, 2024, compared to the six months ended December 31, 2023
The following discussion compares operating data for the six months ended December 31, 2024, to the data for the six months ended December 31, 2023:
| Six Months Ended December 31, | ||||||||||||||||
| 2024 | 2023 | $ Change | % Change | |||||||||||||
| Revenue | $ | 7,894 | $ | – | $ | 7,894 | 100% | |||||||||
| Cost of revenue | 105,911 | – | 105,911 | 100% | ||||||||||||
| Gross Profit | (98,017 | ) | (98,017 | ) | 100% | |||||||||||
| Research and Development | 88,000 | – | 88,000 | 100% | ||||||||||||
| General and administrative | 2,425,421 | 635,132 | 1,790,289 | 282% | ||||||||||||
| Total operating expenses | 2,513,421 | 635,132 | 1,878,289 | 296% | ||||||||||||
| Net loss from operations | $ | (2,611,438 | ) | $ | (635,132 | ) | $ | (1,976,306 | ) | 3,111% | ||||||
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Revenue
Revenue was $7,894 for the six months ended December 31, 2024, as compared to $0 for 2023, an increase of $7,894, which was the result of the Company’s first contract for the leasing of GenFlat Containers.
Cost of revenue
Cost of revenue was $105,911 for the six months ended December 31, 2024, as compared to $0 for 2023, an increase of $105,911. The cost of revenue for the six months ended December 31, 2024 is related to $85,442 of depreciation expense of rental inventory and $20,469 transportation expenses of the Company’s collapsible marine container.
Research and Development Expenses
Research and development expenses were $88,000 for the six months ended December 31, 2024, as compared to $0 for 2023, an increase of $88,000, which was the result of increased engineering, consulting and research and development activity of the Company’s collapsible marine containers and related equipment.
General and Administrative Expenses
General and administrative expenses for the six months ended December 31, 2024, were $2,425,421, compared to $635,132 for 2023, an increase of $1,790,289, which was primarily related to an increase in stock-based compensation of $1,650,799, compensation expense, salaries, and benefits, consulting and marketing and advertising-related expenses, and other professional fees as a result of the Company increasing its operations around developing its product and raising capital, and public company reporting obligations.
Cash Flows
The following table summarizes our cash flows from operating, investing, and financing activities for the six months ended December 31, 2024, and 2023:
| Six months ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows used in operating activities | $ | (656,533 | ) | $ | (1,800,355 | ) | ||
| Cash flows used in investing activities | – | – | ||||||
| Cash flows provided by financing activities | 958,529 | 1,886,332 | ||||||
| Net change in cash | $ | 301,996 | $ | 85,977 | ||||
Operating Activities
Cash used in operating activities is primarily the result of our operating losses, reduced by the impact of non-cash expenses, including non-cash depreciation and amortization expenses, and changes in the asset and liability accounts.
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Net cash used in operating activities for the six months ended December 31, 2024, was $656,533 versus net cash used in operating activities of $1,800,355 for the six months ended December 31, 2023, a decrease of $1,143,822. The decrease in net cash used in operating activities was primarily due to an increase in net loss of $1,980,306 and stock-based compensation of $1,969,542.
We expect cash used in operating activities to fluctuate significantly in future periods because of a number of factors, some of which are outside of our control, including, among others: obtaining additional lease contracts and the success we achieve in generating revenue.
Investing Activities
There was no cashflow from investing activities during the six months ended December 31, 2024 and 2023.
Financing Activities
Net cash provided by financing activities during the six months ended December 31, 2024 was $958,529, a decrease of $927,803 from cash provided by financing activities in 2023 of $1,886,332. The decrease consisted of $94,750 of proceeds from loans from related party, $99,996 of proceeds from note payable from a related party, partially offset by repayments on related party notes payable, and repayment of advances from related party of $208,481. Proceeds from sale of common stock was $972,264 and $2,089,298 in 2024 and 2023, respectively, a decrease of $1,117,034.
Liquidity and Capital Resources
Our future expenditures and capital requirements will depend on numerous factors, including: the rate at which we can lease additional GenFlat containers to new and existing customers, the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; market acceptance of our products and competing products, and the rate at which we hire employees to support operations. We expect that we will incur approximately $95,000 of expenditures per month over the next 12 months.
As of December 31, 2024, we had cash of $340,967, and working capital of $190,416. We believe that our existing cash will not be sufficient to fund our present operations during the next 12 months and beyond. The Company’s audited annual consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At December 31, 2024 the Company had not yet achieved consistent profitable operations and expects to incur further losses in the development of its business, all of which raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has initiated a formal sales and marketing plan including direct email campaigns, industry events, and business to business digital advertising to generate sales. The Company also intends to raise funds through an equity offering to meet the capital requirements to manufacture its products, and is currently offering of up to 1,200,000 shares at a price of $6.00 per share. However, there is no assurance of additional funding being available through these plans or other sources.
During the year ended June 30, 2024, the Company sold a total of 564,628 shares of common stock in exchange for gross cash proceeds of $2,339,300. Of these shares, 33,333 were issued during the period ended September 30, 2024. In July 2023, GenFlat also returned $50,000 in cash to an investor who subscribed to shares during the year ended June 30, 2023.
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During the three months ended September 30, 2024, GenFlat sold a total of 23,000 shares of its common stock in exchange for net cash proceeds of $138,000. During the three months ended December 31, 2024, GenFlat sold a total of 139,044 shares of its common stock in exchange for net cash proceeds of $834,264. These shares were issued subsequent to the period ended December 31, 2024.
Capital Expenditures
We do not have any contractual obligations for ongoing capital expenditures at this time. We do, however, purchase equipment necessary to conduct our operations on an as needed basis.
Contractual Obligations
On March 26, 2021, the Company entered into a promissory note agreement with a third party for a total principal of $125,000. The Company will pay 2.5% per annum, compounded annually until the total principal is paid in full. The note has no maturity date and no default interest rate. As of December 31, 2024 and June 30, 2024, the balance owed on the note was $50,500.
During the year ended June 30, 2024, the Company entered into three promissory note agreements with a the Company’s CEO, Drew Hall, for a total principal of $205,000. The Company will pay 2.5% per annum, until the total principal is paid in full. The note has no maturity date and no default interest rate. During the year ended June 30, 2024, the Company repaid $100,000. During the period ended September 30, 2024, the Company repaid $105,000 on these promissory notes.
During the period ended December 31, 2024, the Company entered into a note agreement with the Company’s CEO, Drew Hall for a total principal of $44,750. The Company will pay 2.5% per annum, until the total principal is paid in full. The note has no maturity date and no default interest rate. During the period ended December 31, 2024, the Company repaid $44,750 on these promissory notes.
On July 1, 2024 and August 21, 2024, the Company entered into six and one separate Advisory Committee Member Agreements, respectively, and agreed to the following compensation in each agreement.
| a. | Cash Compensation. $5,000 annually, payable on June 30th of each year of service. | |
| b. | Equity Compensation. Subject to Board approval, in respect of calendar year 2024, stock options for 100,000 shares of Company stock. The stock options vest as follows: 1) Fifty thousand (50,000) options upon execution of the Advisory Committee Member Agreements; 2) Twenty-five thousand (25,000) options on the first anniversary, and 3) Twenty-five thousand (25,000) options on the second anniversary, in all cases subject to continued service as of such vesting dates. Vested stock options must be exercised within ten (10) years of the vesting date. |
The Company maintains an operating lease for its office space with the Company’s CEO, Drew Hall. The lease has a remaining term of 4 months and a monthly payment of $1,200. On January 3, 2025, the Company extended the operating lease for its office space to expire on January 31, 2026, and agreed to pay $1,320 on a monthly basis.
On July 30, 2024, the Company entered into a promissory note agreement for a total principal of $99,996. The Company will pay 2.5% per annum, until the total principal is paid in full. The note has no maturity date and a default interest rate of 18%. As of December 31, 2024, the balance owed on the note was $99,996. Accrued interest on the note was $1,055 as of December 31, 2024. In December 2024, the noteholder elected to receive shares in settlement of the principal balance. The Company issued 16,666 shares of common stock to settle the note payable in January 2025.
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On October 1, 2024, the Company entered into a promissory note agreement with a significant shareholder for a total principal of $50,000. The Company will pay 10.00% per annum, until the total principal is paid in full. The note has a maturity date of November 1, 2024 and a default interest rate of 18%. During the period ended December 31, 2024, the Company repaid a total of $50,000 on the promissory note agreements and $573 of accrued interest. As of December 31, 2024, the balance owed on the note was $0.
On November 4, 2024, the Company entered into a financing engagement agreement with a placement agent to act as the exclusive underwriter (the “Underwriter”) in connection with a future equity offering (the “Offering”). The Underwriter shall be entitled to an underwriting discount or cash fee equal to 7% of the gross proceeds of the Offering, a non-accountable expense reimbursement equal 1% of the gross proceeds of the Offering, and a warrant purchase option to purchase such number of warrants equal to 7% of the total number of units sold in the offering, which option will expire five years from the date of the Offering prospectus (the “Unit Purchase Option”). The Unit Purchase Option shall have an exercise price equal to 115% of the offering price of the Units sold in the Offering. The Company paid the Underwriter an advance of $15,000 during the three months ended December 31, 2024 related to this agreement.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Critical Accounting Policies and Estimates
The Company considers its critical accounting policies and estimates to be as follows:
Revenue Recognition
The Company is principally engaged in the business of renting collapsible marine shipping containers. The Company’s rental transactions are accounted for under ASC Topic 842, Leases, ("Topic 842"). Our revenue includes revenue generated from renting equipment to customers and is recognized on a straight-line basis over the length of the rental contract. As part of this straight-line methodology, when the equipment is returned, the Company recognizes as incremental revenue the excess, if any, between the amount the customer is contractually required to pay, which is based on the rental contract period applicable to the actual number of days the equipment was out on rent, over the cumulative amount of revenue recognized to date. In any given accounting period, the Company will have customers return equipment and be contractually required to pay more than the cumulative amount of revenue recognized to date under the straight-line methodology. Provisions for discounts, rebates to customers and other adjustments are provided for in the period the related revenue is recorded.
The Company’s sale of rental and new equipment, parts and supplies to customers are recognized under ASC Topic 606, Revenue from Contracts with Customers, ("Topic 606"). The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. The amount of revenue recognized reflects the consideration the Company expects to be entitled to in exchange for such products or services.
Rental Inventory
Rental inventory consists of collapsible marine shipping containers. Rental inventory is stated at cost, net of related discounts, with an estimated useful life of 10 years. Generally, when rental equipment is acquired, the Company estimates the period that it will hold the asset, primarily based on historical measures of the amount of rental activity (e.g. equipment usage) and the targeted age of equipment at the time of disposal. The Company also estimates the residual value of the applicable rental equipment at the expected time of disposal. The residual value for rental equipment is affected by factors which include equipment age and amount of usage. Depreciation is recorded over the estimated holding period. Depreciation rates are reviewed on a quarterly basis based on management's ongoing assessment of present and estimated future market conditions, their effect on residual values at the time of disposal and the estimated holding periods. Market conditions for used equipment sales can also be affected by external factors such as the economy, natural disasters, fuel prices, supply of similar used equipment, the market price for similar new equipment and incentives offered by manufacturers of new equipment. These key factors are considered when estimating future residual values and assessing depreciation rates. As a result of this ongoing assessment, the Company makes periodic adjustments to depreciation rates of rental equipment in response to changed market conditions.
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Accounts Receivable
Accounts receivable is carried at their estimated collectible amounts. Accounts receivable is periodically evaluated for collectability based on past credit history with customers and their current financial condition. We had an allowance of $13,127 and $0 at December 31, 2024 and June 30, 2024, respectively.
Long-lived Assets
The Company amortizes acquired definite-lived intangible assets over their estimated useful lives. Other indefinite-lived intangible assets are not amortized but subject to annual impairment tests. In accordance with ASC 360 “Property Plant and Equipment,” the Company reviews the carrying value of intangibles subject to amortization and long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.
Leases
We account for our leases under ASC 842 - Leases. We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of obligations under operating leases, and obligations under operating leases, non-current on our balance sheets.
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date, adjusted by the deferred rent liabilities at the adoption date. Short-term leases of one year or less are not recognized as ROU assets and liabilities. If our leases do not provide an implicit rate, we use our estimated incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) that are adopted by us as of the specified effective date.
There are no other recently issued accounting pronouncements that we have yet to adopt that are expected to have a material effect on our financial position, results of operations, or cash flows.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
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ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures.
Our chief executive officer, who serves as our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this report on Form 10-Q. Based on this evaluation, our principal executive officer/principal financial officer concluded that as a result of the material weakness in our internal control over financial reporting discussed below, our disclosure controls and procedures were not effective at ensuring that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding disclosure.
The matters involving internal controls and procedures that our management considered to be material weaknesses in our internal control over financial reporting as of December 31, 2024 include the following:
| · | We do not have written documentation of our internal control policies and procedures. | |
| · | Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. To the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. |
A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard 1305) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
In light of the material weakness described above, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.
Changes in Internal Control Over Financial Reporting.
There were no changes in our internal control over financial reporting during the quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 1A. RISK FACTORS.
Not Applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
The Company has sold the following securities without registering the securities under the Securities Act:
| Date | Security | |
| Oct - Dec 2024 | Common Stock — 139,044 shares of common stock at $6.00 per share pursuant to a private offering. | |
| Oct - Dec 2024 | Common Stock – 16,666 shares of common stock at $6.00 per share upon conversion of the principal balance of $99,996 owed on a promissory note. |
All of the securities were offered and sold in reliance upon exemptions from registration under Section 4(a)(2) of the Securities Act and/or (i) Rule 506 of Regulation D promulgated thereunder; or (ii) Regulation S promulgated thereunder. No underwriters were utilized, and no commissions or fees were paid with respect to any of the above transactions.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable.
ITEM 5. OTHER INFORMATION.
During the three months ended December 31, 2024,
none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act)
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ITEM 6. EXHIBITS.
Exhibit Index
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
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GenFlat Holdings, Inc., Registrant |
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| Date: February 6, 2025 | By: | /s/ Drew D. Hall | |
| Drew D. Hall | |||
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Chief Executive Officer and Chief Financial Officer (Principal Executive and Principal Financial Officer) |
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