Onar Holding Corp 10-Q for FY2022 Q3
Onar Holding Corp (ONAR)
About this 10-Q
Onar Holding Corp filed this 10-Q on November 15, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).
Headline figures
Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.36M
- up 120.7% from $616.47K a year earlier
- Net income
- $237.67K
- compared with a net loss of $56.95K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal quarter ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM _____________ TO _____________
Commission File Number
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(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of |
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incorporation or organization) |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act: None.
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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “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 |
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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
State the number of shares of the issuer’s common stock outstanding, as of the latest practicable date:
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
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Unregistered Sales of Equity Securities and Use of Proceeds. |
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| Table of Contents |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended and Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this Report. These factors include:
| ● | the need for additional funding; | |
| ● | our lack of a significant operating history; | |
| ● | the fact that our sole officer and director has significant control over our voting stock; | |
| ● | the loss of key personnel or failure to attract, integrate and retain additional personnel; | |
| ● | corporate governance risks; | |
| ● | economic downturns; | |
| ● | the level of competition in our industry and our ability to compete; | |
| ● | our ability to respond to changes in our industry; | |
| ● | our ability to protect our intellectual property and not infringe on others’ intellectual property; | |
| ● | our ability to scale our business; | |
| ● | our ability to maintain supplier relationships; | |
| ● | our ability to obtain and retain customers; | |
| ● | our ability to execute our business strategy in a very competitive environment; | |
| ● | trends in and the market for recreational pools and services; | |
| ● | lack of insurance policies; | |
| ● | dependence on a small number of customers; | |
| ● | changes in laws and regulations; | |
| ● | the market for our common stock; | |
| ● | our ability to effectively manage our growth; | |
| ● | dilution to existing stockholders; | |
| ● | costs and expenses associated with being a public company; | |
| ● | client lawsuits, damages, judgments and settlements required to be paid in connection therewith and the effects thereof on our reputation; | |
| ● | health risks, economic slowdowns and rescissions and other negative outcomes caused by COVID-19 and governmental responses thereto; | |
| ● | increased inflation, interest rates and supply constraints, and possible recessions caused thereby; | |
| ● | economic downturns both in the United States and globally; | |
| ● | risk of increased regulation of our operations; and | |
| ● | other risk factors included under “Risk Factors” below. | |
You should read the matters described and incorporated by reference in “Risk Factors” and the other cautionary statements made in this Report, and incorporated by reference herein, as being applicable to all related forward-looking statements wherever they appear in this Report. We cannot assure you that the forward-looking statements in this Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.
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| Table of Contents |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Reliant Holdings, Inc. and Subsidiaries | ||||||||
Consolidated Balance Sheets | ||||||||
(unaudited) | ||||||||
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ASSETS |
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Current Assets |
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Cash |
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Accounts receivable |
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Federal income tax receivable |
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House and real estate inventory |
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Contract assets |
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Prepaid expenses |
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Total current assets |
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Equipment, net of accumulated depreciation of $ |
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September 30, 2022 and December 31, 2021, respectively |
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Right-of-use asset |
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Total Assets |
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Current Liabilities |
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Accounts payable and accrued liabilities |
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Contract liabilities |
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Construction loan |
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Current portion of note payable |
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Current portion of right-of-use liabilities |
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Total current liabilities |
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Long-term note payable, net of current portion |
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Right-of-use liability, net of current portion |
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Total Liabilities |
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Commitments and Contingencies |
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Stockholders' Deficit |
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Preferred stock, |
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Preferred stock Series A, |
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Common stock, |
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Additional paid-in capital |
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Accumulated deficit |
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Total Stockholders' Deficit |
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Total Liabilities and Stockholders' Deficit |
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The accompanying notes are an integral part of these unaudited consolidated financial statements. | ||||||||
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| Table of Contents |
Reliant Holdings, Inc. and Subsidiaries | ||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||
(unaudited) | ||||||||||||||||
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| For the Three Months Ended |
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Revenue |
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Cost of goods sold |
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Gross margin |
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Operating expenses |
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General and administrative |
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Total operating expenses |
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Income (loss) from operations |
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Other income (expense) |
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Interest income |
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Interest expense |
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Gain on forgiveness of debt |
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Total other income (expense) |
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Income (loss) before income taxes |
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Provision for income tax |
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Net income (loss) |
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Net loss per share - basic and diluted |
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Weighted average common shares outstanding |
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The accompanying notes are an integral part of these unaudited consolidated financial statements. | ||||||||||||||||
| 5 |
| Table of Contents |
Reliant Holdings, Inc. and Subsidiaries | ||||||||||||||||||||||||||||
Consolidated Statements of Stockholders’ Deficit | ||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2022 and 2021 | ||||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||
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| Additional |
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| Preferred Stock |
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| Common Stock |
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| Paid in |
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| Amount |
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| Capital |
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| Deficit |
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| Total |
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Balance December 31, 2021 |
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Net loss |
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Balance March 31, 2022 |
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Net income |
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Balance June 30, 2022 |
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Net income |
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Balance September 30, 2022 |
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Balance December 31, 2020 |
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Stock-based compensation |
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Net loss |
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Balance March 31, 2021 |
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Stock-based compensation |
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Preferred Shares issued for Compensation |
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Net income |
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Balance June 30, 2021 |
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Net loss |
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Balance September 30, 2021 |
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The accompanying notes are an integral part of these unaudited consolidated financial statements. | ||||||||||||||||||||||||||||
| 6 |
| Table of Contents |
Reliant Holdings, Inc. and Subsidiaries | ||||||||
Consolidated Statements of Cash Flows | ||||||||
(unaudited) | ||||||||
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| ||||
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| For the Nine Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Operating Activities |
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| ||
Net income (loss) |
| $ |
|
| $ | ( | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: |
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Stock-based compensation |
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Depreciation |
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Bad debt expense |
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Gain on forgiveness of debt |
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| ( | ) | |
Changes in operating assets and liabilities: |
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Accounts receivable |
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Contract assets |
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House and real estate inventory |
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| ( | ) |
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| ( | ) |
Prepaid and other current assets |
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Right-of-use asset |
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Contract liabilities |
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| ( | ) |
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Accounts payable and accrued liabilities |
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| ( | ) | |
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Net cash provided by operating activities |
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Financing Activities |
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Proceeds from construction loan |
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Payments on note payable |
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| ( | ) |
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| ( | ) |
Payments on Right-of-use liability |
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| ( | ) |
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| |
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Net cash provided by (used in) financing activities |
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| ( | ) | |
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Net change in cash |
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Cash - beginning of period |
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Cash - end of period |
| $ |
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| $ |
| ||
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Supplemental Disclosures |
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Interest paid |
| $ |
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| $ |
| ||
Income taxes paid |
| $ |
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| $ |
| ||
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Non-cash investing and financing activities: |
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Establishment of right-of-use asset |
| $ |
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| $ |
| ||
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The accompanying notes are an integral part of these unaudited consolidated financial statements. | ||||||||
| 7 |
| Table of Contents |
Reliant Holdings, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Three and Nine Months ended September 30, 2022 and 2021
(unaudited)
Note 1. The Company and Summary of Significant Accounting Policies
The Company
Reliant Holdings, Inc. (the “Company”) was formed as a Nevada corporation on May 19, 2014. On May 23, 2014, Reliant Holdings, Inc., along with Reliant Pools, Inc., formerly Reliant Pools, G.P., which was formed in September 2013 (“Reliant Pools”) and the shareholders of Reliant Pools, entered into an Agreement for the Exchange of common stock whereby Reliant Pools, Inc. became a wholly-owned subsidiary of Reliant Holdings, Inc. Reliant Holdings, Inc. designs, and installs swimming pools. On October 10, 2018, the Company incorporated a new wholly-owned subsidiary in Texas, Reliant Custom Homes, Inc. During the third quarter of 2019, the Company purchased land on which it is in the process of constructing a custom home. The Company is headquartered in Austin, Texas. In September 2021, we formed Reliant Solar Energy, Inc., a wholly-owned Texas subsidiary.
Basis of Presentation
The financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).
The consolidated financial statements and related disclosures as of September 30, 2022 are unaudited, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations. In our opinion, these unaudited financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair statement of the results for the interim periods. These unaudited financial statements should be read in conjunction with the audited financial statements of the Company for the years ended December 31, 2021 and 2020 included in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on April 13, 2022. The results of operations for the nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full year ended December 31, 2022.
Revenue Recognition
On January 1, 2018, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (the “new revenue standard”) to all contracts using the modified retrospective method. The adoption of the new revenue standard had no material impact on our condensed consolidated financial statements as it did not require a change in revenue recognition. As such, comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.
Revenue is recognized based on the following five step model:
- | Identification of the contract with a customer | |
- | Identification of the performance obligations in the contract | |
- | Determination of the transaction price | |
- | Allocation of the transaction price to the performance obligations in the contract | |
- | Recognition of revenue when, or as, the Company satisfies a performance obligation |
All of the Company’s revenue is currently generated from the design and installation of swimming pools. As such, no further disaggregation of revenue information is provided.
| 8 |
| Table of Contents |
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct.
Performance Obligations Satisfied Over Time
Revenue for our contracts that satisfy the criteria for over time recognition is recognized as the work progresses.
Performance Obligations Satisfied at a Point in Time
Revenue for our contracts that do not satisfy the criteria for over time recognition is recognized at a point in time. Substantially all of our revenue recognized at a point in time is for work performed for pool maintenance or repairs. Unlike our construction contracts that use a cost-to-cost input measure for performance, the pool maintenance or repairs utilize an output measure for performance based on the completion of a unit of work. The typical time frame for completion of these services is less than one month. Upon fulfillment of the performance obligation, the customer is provided an invoice (or equivalent) demonstrating transfer of control or completion of service to the customer. We believe that point in time recognition remains appropriate for these contracts and will continue to recognize revenues upon completion of the performance obligation and issuance of an invoice.
Contract modifications are routine in the performance of our contracts. Contracts are often modified to account for changes in the contract specifications or requirements. In most instances, contract modifications are for goods or services that are not distinct, and, therefore, are accounted for as part of the existing contract.
Backlog
On September 30, 2022, we had approximately $
Contract Estimates
Accounting for long-term contracts and programs involves the use of various techniques to estimate total contract revenue and costs. For long-term contracts, we estimate the profit on a contract as the difference between the total estimated revenue and expected costs to complete a contract and recognize that profit over the life of the contract.
Contract estimates are based on various assumptions to project the outcome of future events. These assumptions include labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials, and the performance of subcontractors.
| 9 |
| Table of Contents |
Variable Consideration
Transaction price for our contracts may include variable consideration, which includes increases to transaction price for approved and unapproved change orders, claims and incentives, and reductions to transaction price for liquidated damages. Change orders, claims and incentives are generally not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as a modification of the existing contract and performance obligation. We estimate variable consideration for a performance obligation at the most likely amount to which we expect to be entitled (or the most likely amount we expect to incur in the case of liquidated damages), utilizing estimation methods that best predict the amount of consideration to which we will be entitled (or will be incurred in the case of liquidated damages). We include variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. The effect of variable consideration on the transaction price of a performance obligation is recognized as an adjustment to revenue on a cumulative catch-up basis. To the extent unapproved change orders and claims reflected in transaction price (or excluded from transaction price in the case of liquidated damages) are not resolved in our favor, or to the extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue. No adjustments on any one contract were material to our consolidated financial statements for the nine months ended September 30, 2022.
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts (contract assets) on the consolidated balance sheet. On our construction contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., biweekly or monthly) or upon achievement of contractual milestones. Generally, billing occurs prior to revenue recognition, resulting in contract liabilities. These assets and liabilities are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period.
Home sale revenues - Home sale revenues and related profit are generally recognized when title to and possession of the home are transferred to the buyer at the home closing date. Our performance obligation to deliver the agreed-upon home is generally satisfied at the home closing date. Home sale contract assets consist of cash from home closings held in escrow for our benefit, typically for less than five days, which are considered deposits in-transit and classified as cash. Contract liabilities, include customer deposit liabilities related to homes sold but not yet delivered to buyers, totaled $
Land sale revenues - We periodically elect to sell parcels of land to third parties in the event such assets no longer fit into our strategic operating plans or are zoned for commercial or other development. Land sales are generally outright sales of specified land parcels with cash consideration due on the closing date, which is generally when performance obligations are satisfied.
Accounts Receivable and Allowances
The Company does not charge interest to its customers and carries its customers’ receivables at their face amounts, less an allowance for doubtful accounts. Included in accounts receivable are balances billed to customers pursuant to retainage provisions in certain contracts that are due upon completion of the contract and acceptance by the customer, or earlier as provided by the contract. Based on the Company’s experience in recent years, the majority of customer balances at each balance sheet date are collected within twelve months. As is common practice in the industry, the Company classifies all accounts receivable, including retainage, as current assets. The contracting cycle for certain long-term contracts may extend beyond one year, and accordingly, collection of retainage on those contracts may extend beyond one year.
| 10 |
| Table of Contents |
The Company grants trade credit, on a non-collateralized basis (with the exception of lien rights against the property in certain cases), to its customers and is subject to potential credit risk related to changes in business and overall economic activity. The Company analyzes specific accounts receivable balances, historical bad debts, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In the event that a customer balance is deemed to be uncollectible, the account balance is written-off against the allowance for doubtful accounts.
Classification of Construction Contract-related Assets and Liabilities
Contract assets are presented as a current asset in the accompanying consolidated balance sheets, and contract liabilities are presented as a current liability in the accompanying consolidated balance sheets. The Company’s contracts vary in duration, with the duration of some larger contracts exceeding one year. Consistent with industry practices, the Company includes the amounts realizable and payable under contracts, which may extend beyond one year, in current assets and current liabilities. The vast majority of these balances are settled within one year.
Equipment
Equipment, consisting mainly of Company vehicles, is stated at cost. The Company depreciates the cost of equipment using the straight- line method over the estimated useful lives of the assets. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations for the period. The cost of maintenance and repairs is charged to operations as incurred; significant renewal improvements are capitalized. During the nine months ended September 30, 2022 and 2021 depreciation expense was $
Home and Real Estate Inventory
Inventory is stated at cost unless the carrying value is determined to not be recoverable, in which case the affected inventory is written down to fair value. Cost includes land acquisition, land development, and home construction costs, including interest, real estate taxes, and certain direct and indirect overhead costs related to development and construction. The specific identification method is used to accumulate home construction costs.
We capitalize interest cost into homebuilding inventories. Interest expense is allocated over the period based on the timing of home closings.
Cost of revenues includes the construction cost, average lot cost, estimated warranty costs, and closing costs applicable to the home. Sales commissions are classified within selling, general, and administrative expenses. The construction cost of the home includes amounts paid through the closing date of the home, plus an accrual for costs incurred but not yet paid.
We assess the recoverability of our land inventory in accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 360, “Property, Plant, and Equipment.” We review our home and real estate inventory for indicators of impairment by property during each reporting period. If indicators of impairment are present for a property, generally, an undiscounted cash flow analysis is prepared in order to determine if the carrying value of the assets in that community exceeds the undiscounted cash flows. Generally, if the carrying value of the assets exceed their estimated undiscounted cash flows, the assets are potentially impaired, requiring a fair value analysis. Our determination of fair value is primarily based on a discounted cash flow model which includes projections and estimates relating to sales prices, construction costs, sales pace, and other factors. However, fair value can be determined through other methods, such as appraisals, contractual purchase offers, and other third-party opinions of value. Changes in these expectations may lead to a change in the outcome of our impairment analysis, and actual results may also differ from our assumptions. For the nine months ended September 30, 2022, we recorded $
| 11 |
| Table of Contents |
Earnings (Loss) Per Share
In accordance with accounting guidance now codified as ASC Topic 260“Earnings (Loss) per Share,” basic earnings (loss) per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents, and potentially dilutive securities outstanding during the period. There were no dilutive shares outstanding during the nine months ended September 30, 2022 and 2021.
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 financial statements.
COVID-19
A novel strain of coronavirus (“COVID-19”) was first identified in December 2019, and subsequently declared a global pandemic by the World Health Organization on March 11, 2020. As a result of the outbreak, many companies have experienced disruptions in their operations, workforce and markets served. While the Company has to date, not suffered any negative effects of COVID-19, the governmental response thereto, or any declines in demand for the Company’s services, the full extent of the COVID-19 outbreak and the ultimate impact on the Company’s operations is uncertain. A prolonged disruption could have a material adverse impact on financial results and business operations of the Company.
Note 2. Accounts Receivable
Accounts receivable consisted of the following: |
|
|
|
| ||||
|
| September 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Contract receivables |
| $ |
|
|
|
| ||
Less: Allowance for doubtful accounts |
|
| ( | ) |
|
|
| |
Accounts receivable, net |
| $ |
|
| $ |
| ||
The Company recognized $
Note 3. Contracts in Process
The net asset (liability) position for contracts in process consisted of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Costs on uncompleted contracts |
| $ |
|
| $ |
| ||
Estimated earnings |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Less: Progress billings |
|
|
|
|
|
| ||
Contract liabilities, net |
| $ | ( | ) |
| $ | ( | ) |
| 12 |
| Table of Contents |
The net asset (liability) position for contracts in process is included in the accompanying consolidated balance sheets as follows:
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||
Costs and estimated earnings in excess of billings on uncompleted contracts |
| $ |
|
| $ |
| ||
Billings in excess of costs and estimated earnings on uncompleted contracts |
|
| ( | ) |
|
| ( | ) |
Contract liabilities |
| $ | ( | ) |
| $ | ( | ) |
Note 4. Concentration of Risk
The Company had gross revenue of $
Note 5. Related Party Transactions
The Company compensated Michael Chavez, a greater than 10% shareholder of the Company, as a consultant to the Company, in the amount totaling $
Note 6. Equity
From January 2016 to September 2016, the Company sold
In September 2016, the Company discovered that the investors in the January 2016 to September 2016 offering may not have been provided all of the information and materials (including current audited financial statements), as is required under the Securities Act of 1933, as amended (the “Securities Act”) in order to claim an exemption from registration pursuant to Rule 506(b) of the Securities Act. The Company believes that all such transactions still complied with, and were exempt from registration under Section 4(a)(2) of the Securities Act because the recipients acquired the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof; the securities were offered without any general solicitation by the Company or the Company’s representatives; no underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions; the securities sold are subject to transfer restrictions, and the certificates evidencing the securities (or book entry issuances) contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom; and the securities were not registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.
Nevertheless, based on the above, the Company offered the January 2016 to September 2016 purchasers of the Company’s common stock the right to rescind their previous common stock acquisitions and receive, in exchange for any shares relinquished to the Company, a payment equal to their original purchase price plus interest at the applicable statutory rate in the state in which they reside. The rescission offer expired at 5:00 pm (CST) on October 26, 2016. None of the prior purchasers opted to rescind their prior purchases in connection with the rescission offer.
| 13 |
| Table of Contents |
During the first quarter of fiscal 2017, the Company learned that in 2009, Michael Chavez, the former President and former sole director, was barred from association with any Financial Industry Regulatory Authority, Inc. (FINRA) member in any capability. Mr. Chavez similarly became aware of the FINRA bar at the same time. Pursuant to Rule 506(d), Rule 506 of the Securities Act, is not available for a sale of securities if among other persons, any director or executive officer of an issuer has been subject to certain disqualifying events after September 23, 2013, including suspension or expulsion from membership in a self-regulatory organization (SRO), such as FINRA. However, in the event the disqualifying event occurred prior to September 23, 2013, the issuer is not prohibited from relying on Rule 506, provided that pursuant to Rule 506(e) of the Securities Act, an issuer is required to furnish to each purchaser, a reasonable time prior to sale, a description in writing of any matters that would have triggered disqualification under Rule 506(d)(1), but occurred before September 23, 2013.
As Mr. Chavez’s FINRA bar constituted a disqualifying event under Rule 506(d), the Company was required to furnish to each purchaser of shares of the Company, a reasonable time prior to sale, a description in writing of such event. The Company did not do that, because as described above, the Company and Mr. Chavez only became aware of the FINRA bar after the close of the offering. Notwithstanding the fact that the Company was not aware of Mr. Chavez’s FINRA bar, the Company determined that the failure to provide such information may prohibit the Company from relying on a Rule 506 exemption for the prior issuances and sales of shares. The Company believes that all such transactions still complied with, and were exempt from registration under Section 4(a)(2) of the Securities Act, because the recipients acquired the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof; the securities were offered without any general solicitation by us or the Company’s representatives; no underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions, the securities sold/issued were subject to transfer restrictions, and the certificates evidencing the securities (or book entry issuances) contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom; and the securities were not registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.
Nevertheless, management determined that the Company would offer rescission to all of its stockholders in April 2017. In connection therewith, in April 2017, the Company offered every stockholder of the Company’s common stock the right to rescind their previous purchases and acquisitions and to receive, in exchange for any shares relinquished to us, a payment equal to their original purchase price or consideration provided, plus interest at the applicable statutory rate in the state in which they reside. The rescission offer expired at 5:00 pm (CST) on April 29, 2017. None of the Company’s stockholders opted to rescind their prior purchase/acquisitions in connection with the rescission offer.
The federal securities laws and certain state securities laws do not expressly provide that a rescission offer will terminate a purchaser’s right to rescind a sale of securities that was not registered under the relevant securities laws as required. Accordingly, the Company may continue to be potentially liable under certain securities laws for the offer and sale of the shares sold and issued between May 2014 and September 2016, totaling $
This amount is recorded in equity in the accompanying balance sheets. This will be evaluated at each reporting period for reclassification to a liability if a rescission request is made.
Effective on November 3, 2017, Michael Chavez, the Company’s former sole director, Chief Executive Officer and President of the Company, entered into a Voting Agreement with Elijah May, the Company’s then Chief Operating Officer (COO), and current sole director, Chief Executive Officer and President as well as the Company’s COO (the “Voting Agreement”), resulting in a change in control of the Company.
| 14 |
| Table of Contents |
Pursuant to the Voting Agreement, Mr. Chavez provided complete authority to Mr. May to vote the
Effective on November 3, 2017, the Board of Directors of the Company and the Board of Directors of Reliant Pools Inc., the Company’s wholly-owned subsidiary, each then consisting solely of Mr. Chavez, increased the number of members of the Board of Directors of each company from one to two and appointed Mr. May as a member of the Board of Directors of each company to fill the vacancy created by such vacancy.
On December 4, 2020, the Company entered into an investor relations agreement and issued a total of
On January 27, 2021, the Company issued
On June 15, 2021 the Company issued
Note 7. Leases
The Company leases approximately
| 15 |
| Table of Contents |
The components of lease expense were as follows:
|
| For the nine |
| |
|
| Months Ended |
| |
|
| September 30, |
| |
|
| 2022 |
| |
Right of Use (ROU) Operating lease cost: |
|
|
| |
Amortization of assets |
|
|
| |
Interest on lease liabilities |
|
|
| |
Total net lease cost |
| $ |
| |
Supplemental balance sheet information related to leases was as follows:
|
| September 30, |
| |
|
| 2022 |
| |
Operating lease: |
|
|
| |
ROU Real Estate Asset |
| $ |
| |
Accumulated amortization |
|
| ( | ) |
Right of Use, net |
| $ |
| |
|
|
|
|
|
Current portion of lease liabilities |
| $ |
| |
Noncurrent lease liabilities |
|
|
| |
Total lease liabilities |
| $ |
| |
|
|
|
|
|
Weighted average remaining lease term: |
|
|
|
|
Operating leases |
|
| ||
|
|
|
|
|
Weighted average discount rate: |
|
|
|
|
Operating lease |
|
| % | |
Supplemental cash flow and other information related to leases was as follows:
|
| For the nine |
| |
|
| Months Ended |
| |
|
| September 30, |
| |
|
| 2022 |
| |
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
| |
Financing cash flows used for operating leases |
| $ |
| |
|
|
|
|
|
Leased assets obtained in exchange for lease liabilities: |
|
|
|
|
Total lease liabilities |
| $ |
| |
| 16 |
| Table of Contents |
Future minimum annual lease payments required under the operating lease and the present value of the net minimum lease payments are as follows at September 30, 2022:
Fiscal Year Ending |
| Minimum Lease |
| |
September 30, |
| Commitments |
| |
2022 (for the three months remaining) |
| $ |
| |
2023 |
|
|
| |
2024 |
|
|
| |
2025 |
|
|
| |
2026 |
|
|
| |
Total future undiscounted lease payments |
|
|
| |
Less interest |
|
| ( | ) |
Present value of lease payments |
|
|
| |
Less current portion |
|
| ( | ) |
Long-term operating lease liabilities |
| $ |
| |
Lease expense was $
Note 8. Commitments and Contingencies
On December 21, 2018, a former client,
During the year ended December 31, 2021, the Company paid Mr. Moats $
Note 9. Note Payable
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||
Term note with a bank secured by car, payable in monthly installments of $660, including interest at 3.99% through February 27, 2025 |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Term note with a bank secured by car, payable in monthly installments of $1,000, including interest at 6.54% through May 26, 2027 |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Total long-term debt |
|
|
|
|
|
| ||
Less: current portion |
|
| ( | ) |
|
| ( | ) |
Long-term debt net of current portion |
| $ |
|
| $ |
| ||
Note 10. Construction Loan
Effective on April 26, 2021, the Company’s wholly-owned subsidiary, Reliant Custom Homes, Inc., entered into an Extension of Real Estate Note and Lien with First United Bank and Trust Co. (“First United”), pursuant to which First United agreed to extend the due date of our $
note matured on October 28, 2022; however, the Company is currently working with First United to further extend the Note. Amounts borrowed under the loan bear interest at the rate of
| 17 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction
You should read the matters described and incorporated by reference in “Risk Factors” and the other cautionary statements made in this Report, and incorporated by reference herein, as being applicable to all related forward-looking statements wherever they appear in this Report. We cannot assure you that the forward-looking statements in this Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.
This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the audited financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on April 13, 2021 (the “Annual Report”).
Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our consolidated financial statements included above under “Part I - Financial Information” – “Item 1. Financial Statements”.
In this Quarterly Report on Form 10-Q, we may rely on and refer to information regarding the industries in which we operate in general from market research reports, analyst reports and other publicly available information. Although we believe that this information is reliable, we cannot guarantee the accuracy and completeness of this information, and we have not independently verified any of it.
Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” “Reliant”, “Reliant Holdings” and “Reliant Holdings, Inc.” refer specifically to Reliant Holdings, Inc. and its consolidated subsidiaries.
In addition, unless the context otherwise requires and for the purposes of this Report only:
| ● | “Exchange Act” refers to the Securities Exchange Act of 1934, as amended; |
| ● | “SEC” or the “Commission” refers to the United States Securities and Exchange Commission; and |
| ● | “Securities Act” refers to the Securities Act of 1933, as amended. |
Where You Can Find Other Information
We file annual, quarterly, and current reports, proxy statements and other information with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC like us at http://www.sec.gov (our filings can be found at https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001682265). Copies of documents filed by us with the SEC are also available from us without charge, upon oral or written request to our Secretary, who can be contacted at the address and telephone number set forth on the cover page of this Report. Our website address is https://www.reliantholdings.net. The information on, or that may be accessed through, our website is not incorporated by reference into this Report and should not be considered a part of this Report.
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Summary of The Information Contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:
● | Overview. Summary of our operations. | |||
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| ● | Plan of Operations. A description of our plan of operations for the next 12 months including required funding. | ||
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| ● | Results of Operations. An analysis of our financial results comparing the three and nine months ended September 30, 2022 and 2021. | ||
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| ● | Liquidity and Capital Resources. An analysis of changes in our consolidated balance sheets and cash flows and discussion of our financial condition. | ||
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| ● | Critical Accounting Policies and Estimates. Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts. | ||
Overview
Corporate Information
Our principal executive offices are located at 12343 Hymeadow Drive, Suite 3-A, Austin, Texas 78750, and our telephone number is (512) 407-2623.
Summary Description of Business Operations
Residential Pools
We, through our wholly-owned subsidiary Reliant Pools (which has been in operation since September 2013), are an award winning, custom, swimming pool construction company located in the greater Austin, Texas market. We assist customers with the design of, and then construct, recreational pools which blend in with the surroundings, geometric pools which complement the home’s architecture and water features (e.g., waterfalls and negative edge pools) which provide the relaxing sounds of moving water. Moving forward, we may expand our custom pool construction operations locally and regionally, and nationally.
To date, the majority of our growth has been through referral business. We offer a wide variety of pool projects based upon price and the desires of the client. When our sales personnel meet with a prospective customer, we provide them with an array of projects from the basic pool building to more high-end projects that may include waterfalls, mason work, backyard lighting and in-ground spas to highlight the outdoor living experience.
Custom Homes
On October 10, 2018, the Company incorporated a new wholly-owned subsidiary in Texas, Reliant Custom Homes, Inc. and is attempting to expand its operations in the Austin, Texas area as a custom home builder. To date, the Company has engaged a consultant in connection with custom home builder services, and has purchased land located in Lago Vista, Texas, in the Texas Hill Country, outside of Austin, Texas, on which it has started constructing a custom home which it then plans to sell. Current plans are for the custom home to be approximately 2,300 square feet. In April 2020, the Company obtained a construction loan for $221,000 for the construction costs associated with the build, of which $102,177 was outstanding as of September 30, 2022, which funds were used for building materials. The loan has been renewed and has been extended through October 28, 2022, provided that the Company is currently working to further extend the note. To date, the Company’s subcontractors have completed the drywall and the Company plans to begin interior work on the custom home in the next several weeks. The Company currently estimates completing construction on the home sometime in the first quarter of fiscal 2023.
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The construction of our custom home is being conducted under the supervision of an on-site construction manager. Substantially all of our construction work has been, and is planned to continue to be, performed by independent subcontractors under contracts that establish a specific scope of work at an agreed-upon price. In addition, we anticipate that our construction field manager will interact with homebuyers throughout the construction process and instruct homebuyers on post-closing home maintenance.
We plan to maintain efficient construction operations and use industry and company-specific construction practices.
Generally, we anticipate the construction materials to be used in our home builder operations will be readily available from numerous sources. However, the cost of certain building materials, especially lumber, steel, concrete, copper, and petroleum-based materials, is influenced by changes in global commodity prices, national tariffs, and other foreign trade factors. Additionally, the ability to consistently source qualified labor at reasonable prices may be challenging and we cannot determine the extent to which necessary building materials and labor will be available at reasonable prices in the future.
We currently anticipate building custom homes on a build-to-order basis where we do not begin construction of the home until we have a signed contract with a customer. However, we may in the future also build speculative (“spec”) homes, which would allow us to compete with existing homes available in the market, especially for homebuyers that require a home within a short time frame.
We have started to market our custom home services and plan to have our first custom home complete sometime during the first quarter of 2023.
Plan of Operations
We had working capital of $59,093 as of September 30, 2022. With our current cash on hand, expected revenues, and based on our current average monthly expenses, we don’t currently anticipate the need for additional funding in order to continue our operations at their current levels and to pay the costs associated with being a public company for the next 12 months. We may however require additional funding in the future to expand or complete acquisitions. Our plan for the next twelve months is to continue using the same marketing and management strategies and continue providing a quality product with excellent customer service while also seeking to expand our operations organically or through acquisitions as funding and opportunities arise, and, as discussed above, we have also purchased a homesite on which we are in the process of constructing a custom home, which we then plan to sell. As our business continues to grow, customer feedback will be integral in making small adjustments to improve the product and overall customer experience. We plan to raise additional required funding when required through the sale of debt or equity, which may not be available on favorable terms, if at all, and may, if sold, cause significant dilution to existing stockholders. If we are unable to access additional capital moving forward, it may hurt our ability to grow and to generate future revenues.
Since the COVID-19 pandemic began, we have seen a sharp increase in demand for pools, which we attribute to more people working from home, and sheltering in place. We currently have a backlog which continues into December 2022. We are unclear whether the current demand for pools will continue. Notwithstanding that, things are currently getting back to close to normal (with a few exceptions) as to the availability of equipment, after experiencing delays in obtaining required equipment from the 2021 winter storms which affected the Austin area and supply chain constraints. Overall, demand for trade workers is extremely high, which has resulted in higher prices for pools, which we attempt to pass on to customers as much as possible.
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Results of Operations
For the Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021
We had revenue of $1,360,476 for the three months ended September 30, 2022, compared to revenue of $616,470 for the three months ended September 30, 2021, an increase of $744,006 or 121% from the prior period. We recognize revenue based on the percentage that a job is complete rather than upon completion. As such, total revenue recognized for each period may be different than the product of total completed pools during each period multiplied by the average pool contract price of each pool during such period, as the construction of certain pools may have started in one period and ended in another. Revenue increased during the current period due to an increase in pool count during the comparable periods and general timing of contracts as well as the higher priced pools being completed in the current period. We have seen an increase in the demand for pools since March 2020, which we believe is due to more people working from home due to the COVID-19 pandemic.
We had cost of goods sold of $910,152 for the three months ended September 30, 2022, compared to cost of goods sold of $523,719 for the three months ended September 30, 2021, an increase of $386,433 or 74% from the prior period.
Cost of goods sold increased mainly due to an increase in masonry, stone and tile installed in and around our pools and coping expenses associated therewith, excavation and steel costs and gunite, mainly due to increased costs of materials and labor due to supply constraints and increases in pricing due to inflation; however, we have seen an increase across the board in costs and expenses due to increased pricing due to inflation. The timing of our cost of goods sold is materially impacted based on the overall scope and timing of the projects we are working on. In general, costs of goods sold for the three months ended September 30, 2022 were higher than for the three months ended September 30, 2021, due to an increase in the number of pools we are building and an overall increase in material and labor costs due to inflation and in certain cases supply constraints. The expenses which attributed to the increase in cost of goods sold for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, included:
Cost of Goods Sold Expense |
| For the Three Months Ended September 30, 2022 |
|
| For the Three Months Ended September 30, 2021 |
|
| Increase / (Decrease) |
|
| Percentage Change |
| ||||
Cost of decking |
| $ | 104,811 |
|
| $ | 83,700 |
|
| $ | 21,111 |
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| 25.2 | % |
Plaster used in the construction of pools |
|
| 96,843 |
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| 53,951 |
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| 42,892 |
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| 79.5 | % |
Gunite used in the construction of pools |
|
| 104,193 |
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|
| 34,624 |
|
|
| 69,569 |
|
|
| 200.9 | % |
Pool equipment used to filter and circulate the water used in our pools |
|
| 145,707 |
|
|
| 106,329 |
|
|
| 39,378 |
|
|
| 37.0 | % |
Masonry, stone and tile installed in and around our pools and coping expenses associated therewith |
|
| 128,163 |
|
|
| 59,936 |
|
|
| 68,227 |
|
|
| 113.8 | % |
Excavation and steel expenses |
|
| 131,632 |
|
|
| 19,442 |
|
|
| 112,190 |
|
|
| 577.1 | % |
Other, including labor |
|
| 198,803 |
|
|
| 165,737 |
|
|
| 33,066 |
|
|
| 20.0 | % |
Total |
| $ | 910,152 |
|
| $ | 523,719 |
|
| $ | 386,433 |
|
|
| 73.8 | % |
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Cost of goods sold represents our pool construction costs, including raw materials, outsourced labor, installed equipment, tile and coping expenses, excavation costs and permit expenses. We anticipate our cost of goods sold increasing in approximate proportion to increases in revenue and decreasing in approximate proportion to decreases in revenue, moving forward, as our cost of goods sold are factored into the price we charge for our pools and represent the cost of pool construction, the majority of which is not fixed and varies depending on the total number of pools and construction projects we complete during each period and the size and complexity of such projects.
We had a gross margin of $450,324 for the three months ended September 30, 2022, compared to a gross margin of $92,751 for the three months ended September 30, 2021, an increase of $357,573 or 386% from the prior period due to the reasons described above. Gross margin as a percentage of revenue was 33.1% and 15.0% for the three months ended September 30, 2022 and 2021, respectively. Gross margin as a percentage of revenue increased due to higher priced pools being completed in the current period.
We had operating expenses consisting solely of general and administrative expenses of $211,817 for the three months ended September 30, 2022, compared to operating expenses consisting solely of general and administrative expenses of $149,507 for the three months ended September 30, 2021. Operating expenses increased by $62,310 or 42% from the prior period mainly due to higher payroll expenses.
We had interest income of $187 for the three months ended September 30, 2022, compared to interest income of $43 for the three months ended September 30, 2021. Interest income was in connection with interest generated by funds the Company maintained in its savings account.
We had interest expense of $1,022 and $237, for the three months ended September 30, 2022 and 2021, respectively, due to interest paid in connection with loans for Company vehicles, including a car used by our Chief Executive Officer and amounts outstanding on our construction loan, each as described in greater detail under “Liquidity and Capital Resources” below.
We had net income of $237,672 for the three months ended September 30, 2022, compared to a net loss of $56,950 for the three months ended September 30, 2021, an increase in net income of $294,622 or 517%, mainly due to the $744,006 or 121% increase in revenue, offset by the $386,433 or 74% increase in cost of goods sold and the $62,310 or 42% increase in general and administrative expenses.
For the Nine Months Ended September 30, 2022 Compared to the Nine months Ended September 30, 2021
We had revenue of $3,438,580 for the nine months ended September 30, 2022, compared to revenue of $2,006,994 for the nine months ended September 30, 2021, an increase of $1,431,586 or 71% from the prior period. We recognize revenue based on the percentage that a job is complete rather than upon completion. As such, total revenue recognized for each period may be different than the product of total completed pools during each period multiplied by the average pool contract price of each pool during such period, as the construction of certain pools may have started in one period and ended in another. Revenue increased during the current period due to an increase in pool count during the comparable periods and general timing of contracts as well as the higher priced pools being completed in the current period. We have seen an increase in the demand for pools since March 2020, which we believe is due to more people working from home due to the COVID-19 pandemic.
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We had cost of goods sold of $2,458,261 for the nine months ended September 30, 2022, compared to cost of goods sold of $1,495,084 for the nine months ended September 30, 2021, an increase of $963,177 or 64% from the prior period.
Cost of goods sold increased mainly due to an increase in masonry, stone and tile installed in and around our pools and coping expenses associated therewith and increased labor and other costs, mainly due to increased costs of materials and labor due to supply constraints and increases in pricing due to inflation. The timing of our cost of goods sold is materially impacted based on the overall scope and timing of the projects we are working on. In general, costs of goods sold for the nine months ended September 30, 2022 were higher than for the nine months ended September 30, 2021, due to an increase in the number of pools we are building and an overall increase in material and labor costs due to inflation and in certain cases supply constraints. The expenses which attributed to the increase in cost of goods sold for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, included:
Cost of Goods Sold Expense |
| For the Nine Months Ended September 30, 2022 |
|
| For the Nine Months Ended September 30, 2021 |
|
| Increase / (Decrease) |
|
| Percentage Change |
| ||||
Cost of decking |
| $ | 280,325 |
|
| $ | 186,555 |
|
| $ | 93,770 |
|
|
| 50.3 | % |
Plaster used in the construction of pools |
|
| 170,099 |
|
|
| 104,709 |
|
|
| 65,390 |
|
|
| 62.4 | % |
Gunite used in the construction of pools |
|
| 259,232 |
|
|
| 165,573 |
|
|
| 93,659 |
|
|
| 56.6 | % |
Pool equipment used to filter and circulate the water used in our pools |
|
| 378,315 |
|
|
| 251,803 |
|
|
| 126,512 |
|
|
| 50.2 | % |
Masonry, stone and tile installed in and around our pools and coping expenses associated therewith |
|
| 387,845 |
|
|
| 174,379 |
|
|
| 213,466 |
|
|
| 122.4 | % |
Excavation and steel expenses |
|
| 321,285 |
|
|
| 184,039 |
|
|
| 137,246 |
|
|
| 74.6 | % |
Other, including labor |
|
| 661,160 |
|
|
| 428,026 |
|
|
| 233,134 |
|
|
| 54.5 | % |
Total |
| $ | 2,458,261 |
|
| $ | 1,495,084 |
|
| $ | 963,177 |
|
|
| 64.4 | % |
Cost of goods sold represents our pool construction costs, including raw materials, outsourced labor, installed equipment, tile and coping expenses, excavation costs and permit expenses. We anticipate our cost of goods sold increasing in approximate proportion to increases in revenue and decreasing in approximate proportion to decreases in revenue, moving forward, as our cost of goods sold are factored into the price we charge for our pools and represent the cost of pool construction, the majority of which is not fixed and varies depending on the total number of pools and construction projects we complete during each period and the size and complexity of such projects.
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We had a gross margin of $980,319 for the nine months ended September 30, 2022, compared to a gross margin of $511,910 for the nine months ended September 30, 2021, an increase of $468,409 or 92% from the prior period due to the reasons described above. Gross margin as a percentage of revenue was 28.5% and 25.5% for the nine months ended September 30, 2022 and 2021, respectively. Gross margin as a percentage of revenue increased due to higher priced pools being completed in the current period.
We had operating expenses consisting solely of general and administrative expenses of $626,748 for the nine months ended September 30, 2022, compared to operating expenses consisting solely of general and administrative expenses of $883,242 for the nine months ended September 30, 2021 (including $349,333 of stock-based expenses described below under “Liquidity and Capital Resources”). Operating expenses decreased by $256,494 or 29% from the prior period mainly due to the stock-based compensation expenses in the 2021 period, as discussed in greater detail below.
We had interest income of $393 for the nine months ended September 30, 2022, compared to interest income of $49 for the nine months ended September 30, 2021. Interest income was in connection with interest generated by funds the Company maintained in its savings account.
We had interest expense of $2,681 and $730, for the nine months ended September 30, 2022 and 2021, respectively, due to interest paid in connection with loans for Company vehicles, including a car used by our Chief Executive Officer and amounts outstanding on our construction loan, each as described in greater detail under “Liquidity and Capital Resources” below.
We had a gain on forgiveness of debt of $51,577 for the nine months ended September 30, 2021, compared to no gain or loss on the forgiveness of debt for the nine months ended September 30, 2022. The gain on forgiveness of debt for the three months ended September 30, 2021, was in connection with the forgiveness of the PPP Note as discussed below under “Liquidity and Capital Resources”.
We had net income of $351,283 for the nine months ended September 30, 2022, compared to a net loss of $320,436 for the nine months ended September 30, 2021, an increase in net income of $671,719 or 210%, mainly due to the $1,431,586 increase in revenues and $256,494 decrease in general and administrative expenses, offset by the $963,177 increase in cost of goods sold and $51,577 decrease in gain on forgiveness of debt, each as described above.
Liquidity and Capital Resources
We had total assets of $788,391 as of September 30, 2022, consisting of total current assets of $702,900, which included cash of $474,085, house and real estate inventory of $221,628, federal income tax receivable of $416, and prepaid expenses and other current assets of $6,771, equipment, net of accumulated depreciation, of $46,773 and right-of-use asset of $38,718. Federal income tax receivable relates to a payment made by the Company to the United States Treasury in March 2016, in anticipation of the Federal income tax the Company estimated would be owed at the end of the 2016 calendar year. There was no tax due for the years ended December 31, 2016, 2017, 2018, 2019, 2020 or 2021, due to the Company’s net losses, the utilization of a net loss carryforward and application of prepaid taxes. Included in real estate inventory as of September 30, 2022 is the value of the land and construction costs incurred to date, which the Company acquired in the third quarter of 2019, and is currently building a custom home on, as discussed above. Contract assets include estimated earnings in excess of billings on uncompleted contracts. Equipment relates to the vehicle discussed below.
We had total liabilities of $668,978 as of September 30, 2022, which included current liabilities of $643,807, including accounts payable and accrued liabilities of $82,029, contract liabilities, relating to billings in excess of costs and estimated earnings on uncompleted jobs of $423,189, current portion of note payable of $11,017, construction loan of $102,177, and current portion of right-of-use liability of $25,395, and long-term liabilities consisting of a long-term note payable, net of current portion, of $11,713 relating to certain vehicles (discussed below) and $13,458 of right-to-use liability.
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On February 11, 2020, we purchased a Hyundai Genesis G80. The Vehicle had a total purchase price of $50,616, including $11,000 which was paid as a down payment in cash. We entered into a term note, secured by the vehicle, for the remaining amount of the purchase price, which amount accrues interest at the rate of 3.99% per annum and is payable at the rate of $660 per month through maturity on February 27, 2025.
On April 28, 2020, the Company secured a construction loan from First United Bank and Trust Company to be used to develop the land purchased in the third quarter of 2019. The loan is in the amount of $221,000, bears interest at the rate of 6.25% per annum and was due on October 28, 2022; provided that the Company is currently working with the lender to further extend this note. As of September 30, 2022, a total of $102,177 was outstanding on the loan. The Company is currently in discussions to extend the loan.
On October 26, 2021, we purchased a Nissan Rogue for use by Mr. May. The vehicle had a total purchase price of $29,931, including $10,000 which was paid as a down payment in cash. We entered into a term note, secured by the vehicle, for the remaining amount of the purchase price, which amount accrues interest at the rate of 6.54% per annum and is payable at the rate of $336 per month through maturity on May 26, 2027.
On May 11, 2020, we (through Reliant Pools) received a loan (the “Loan”) from Wells Fargo Bank N.A. (the “Lender”) in the principal amount of $51,113, pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020. The Loan was evidenced by a promissory note (the “Note”), dated effective May 4, 2020, issued by the Company to the Lender. The Note was unsecured, was to mature on May 4, 2022 and accrued interest at a rate of 1.00% per annum, payable monthly commencing on November 2, 2020, following an initial deferral period as specified under the PPP. Proceeds from the Loan were available to the Company to fund designated expenses, including certain payroll costs, rent, utilities and other permitted expenses, in accordance with the PPP. Under the terms of the PPP, up to the entire amount of principal and accrued interest could be forgiven to the extent Loan proceeds were used for qualifying expenses as described in the CARES Act and applicable implementing guidance issued by the U.S. Small Business Administration under the PPP (including that up to 60% of such Loan funds were used for payroll). The Company used the entire Loan amount for designated qualifying expenses and applied for forgiveness of the respective Loan in accordance with the terms of the PPP. On April 27, 2021, the Company was notified that the outstanding principal and accrued interest for the PPP Loan was forgiven in full by the SBA.
We had working capital of $59,093 as of September 30, 2022, compared to a working capital deficit of $262,518 as of December 31, 2021.
We had $59,177 of net cash provided by operating activities for the nine months ended September 30, 2022, as compared to $94,975 of net cash provided by operating activities for the nine months ended September 30, 2021. Net cash provided by operating activities for the 2022 period was mainly due to $351,283 of net income, offset by $175,907 of house and real estate inventory and a reduction of $160,537 in contract liabilities. For the 2021 period, net cash provided by operating activities was mainly due to $349,333 of stock-based compensation and $99,454 of increase in contract liabilities, offset by $320,436 of net loss and $51,577 of gain on forgiveness of debt. Stock based compensation includes the issuance, on January 27, 2021, of 700,000 shares of restricted common stock to Elijah May, our sole officer and director, 200,000 shares of restricted common stock to Joel Hefner, the Vice President of Reliant Pools, a non-executive officer position, and 700,000 shares of restricted common stock to Michael Chavez, a consultant to the Company, each in consideration for services rendered. The shares were valued at $0.20 per share, the closing price of the Company’s stock on January 27, 2021.
We had $74,912 of net cash provided by financing activities for the nine months ended September 30, 2022, which was mainly due to $102,177 of proceeds from our construction loan offset by $15,293 of payments on the notes payable related to our vehicle loans and $11,972 of payments on right-of-use liability, as compared to $6,902 of cash used in financing activities for the nine months ended September 30, 2021, which were due to payments on our vehicle loans.
We do not currently have any additional commitments or identified sources of additional capital from third parties or from our officers, directors or majority stockholders. Additional financing may not be available on favorable terms, if at all.
In the future, we may be required to seek additional capital by selling additional debt or equity securities, or otherwise be required to bring cash flows in balance when we approach a condition of cash insufficiency. The sale of additional equity or debt securities, if accomplished, may result in dilution to our then stockholders. Financing may not be available in amounts or on terms acceptable to us, or at all. In the event we are unable to raise additional funding and/or obtain revenues sufficient to support our expenses, we may be forced to curtail or abandon our business operations, and any investment in the Company could become worthless.
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Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates, and such differences may be material.
“Note 1. The Company and Summary of Significant Accounting Policies” in Part I, Item 1 of this Form 10-Q and “Note 1. The Company, Summary of Significant Accounting Policies and Going Concern” in the Notes to Consolidated Financial Statements in Part II, Item 8, of the 2021 Annual Report, describe the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We have established and maintain a system of disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed in our reports filed with the Securities and Exchange Commission pursuant to the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Commission and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), to allow timely decisions regarding required disclosures.
In connection with the preparation of this Quarterly Report on Form 10-Q, our management, with the participation of our Chief Executive Officer (our Principal Executive Officer and Principal Financial Officer), carried out an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2022, as required by Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on the evaluation described above, our management, including our Principal Executive Officer and Principal Financial Officer, concluded that, as of September 30, 2022, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
We regularly review our system of internal control over financial reporting to ensure we maintain an effective internal control environment. There were no changes in our internal control over financial reporting that occurred during the three months ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
The Company’s disclosure controls and procedures are designed to provide the Company’s Principal Executive Officer and Principal Financial Officer with reasonable assurances that the Company’s disclosure controls and procedures will achieve their objectives. However, the Company’s management does not expect that the Company’s disclosure controls and procedures or the Company’s internal control over financial reporting can or will prevent all human error. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Furthermore, the design of a control system must reflect the fact that there are internal resource constraints, and the benefit of controls must be weighed relative to their corresponding costs. Because of the limitations in all control systems, no evaluation of controls can provide complete assurance that all control issues and instances of error, if any, within the Company are detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur due to human error or mistake. Additionally, controls, no matter how well designed, could be circumvented by the individual acts of specific persons within the organization. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and such design may not succeed in achieving its stated objectives under all potential future conditions.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business.
Such current litigation or other legal proceedings are described in, and incorporated by reference in, this “Item 1. Legal Proceedings” of this Form 10-Q from, “Part I” - “Item 1. Financial Statements” in the Notes to Consolidated Financial Statements in “Note 8. Commitments and Contingencies”.
The Company is unable to determine the estimate of the probable or reasonable possible loss or range of losses arising from the above referenced unsettled legal proceedings.
Additionally, the outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected.
Item 1A. Risk Factors
There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on April 13, 2022, under the heading “Item 1A. Risk Factors”, which are incorporated by reference herein, except as discussed below, and investors should review the risks provided in the Annual Report and below, prior to making an investment in the Company. The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in the Annual Report, under “Item 1A. Risk Factors” and below, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.
The demand for our swimming pools may be adversely affected by changes in consumer discretionary spending or unfavorable economic conditions.
Consumer discretionary spending significantly affects our sales and is impacted by factors outside of our control, including general economic conditions, the residential housing market, unemployment rates, wage levels, interest rate fluctuations, inflation, disposable income levels, consumer confidence and access to credit. In economic downturns, the demand for swimming pools may decline, often corresponding with declines in discretionary consumer spending, the growth rate of pool eligible households and swimming pool construction. Even in generally favorable economic conditions, severe and/or prolonged downturns in the housing market could have a material adverse impact on our financial performance. Such downturns expose us to certain additional risks, including but not limited to the risk of customer closures or bankruptcies, which could shrink our potential customer base and inhibit our ability to collect on those customers’ receivables.
We believe that homeowners’ access to consumer credit at attractive interest rates is a critical factor enabling the purchase of new pools. Between late 2006 and early 2010, the unfavorable economic conditions and downturn in the housing market resulted in significant tightening of credit markets, which limited the ability of consumers to access financing for new swimming pools. Any similar tightening of consumer credit or further increase in interest rates could prevent consumers from obtaining financing for pool and related outdoor projects, which could negatively impact our sales.
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Discretionary spending is often adversely affected during times of economic, social or political uncertainty. The potential for natural or man-made disasters or extreme weather, geopolitical events and security issues, labor or trade disputes and similar events could create these types of uncertainties and negatively impact our business in ways that we cannot presently predict.
Supply shortages and other risks related to the demand for skilled labor and materials have in the past and could in the future increase costs, delay deliveries and could adversely affect our financial condition and results of operations.
The pool construction industry experiences price fluctuations and shortages in labor and materials from time to time. Shortages in labor can be due to shortages in qualified trades people, changes in immigration laws and trends in labor migration, lack of availability of adequate utility infrastructure and services, or our need to rely on local subcontractors who may not be adequately capitalized or insured. Shortages of materials can be due to certain disruptions, such as natural disasters, civil or political unrest, trade disputes, difficulties in production or delivery or health issues like the COVID-19 pandemic. Labor and material shortages can be more severe during periods of strong demand for constructive services or during periods in which the markets where we operate experience natural disasters such as hurricanes, severe weather or flooding. Pricing for labor and materials can be affected by the factors discussed above, changes in energy prices, and various other national, regional and local economic and political factors, including inflation and increases due to lack of supply. If we are not able to successfully offset any such increased costs through higher sales prices, it could adversely affect our margin and results of operations.
Economic uncertainty may affect consumer purchases of discretionary items, which has affected and may continue to adversely affect demand for our pools.
Our pools may be considered discretionary items for consumers. Factors affecting the level of consumer spending for such discretionary items include general economic conditions and other factors such as consumer confidence in future economic conditions, fears of recession and trade wars, the price of energy, fluctuating interest rates, the availability and cost of consumer credit, the availability and timing of government stimulus programs, levels of unemployment, inflation, and tax rates. As global economic conditions continue to be volatile or economic uncertainty remains, particularly in light of the COVID-19 pandemic, and with increasing inflation and interest rates, trends in consumer discretionary spending also remain unpredictable and subject to reductions as a result of significant increases in employment, financial market instability, and uncertainties about the future, including, but not limited to potential future recessions. Unfavorable economic conditions have led and in the future may lead, consumers to delay or reduce purchases of our pools. Consumer demand for our products may decline as a result of an economic downturn or recession, or economic uncertainty in the United States. Our sensitivity to economic cycles and any related fluctuation in consumer demand may have a material adverse effect on our business, results of operations, and financial condition.
We have been and may continue to be negatively impacted by inflation.
Increases in inflation have had an adverse effect on our results of operations. Current and future inflationary effects may be driven by, among other things, supply chain disruptions and governmental stimulus or fiscal policies, and geopolitical instability, including the ongoing conflict between the Ukraine and Russia. Continuing increases in inflation, have in the past, and could in the future, impact our costs of labor, equipment, material costs and services and the margins we are able to realize on our pools, all of which could have an adverse impact on our business, financial position, results of operations and cash flows. Inflation has also resulted in higher interest rates, which in turn raises our cost of debt borrowing.
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Our industry and the broader US economy have experienced higher than expected inflationary pressures in the first three quarters of 2022, related to continued supply chain disruptions, labor shortages and geopolitical instability. Should these conditions persist, our business, results of operations and cash flows could be materially and adversely affected.
The first three quarters of 2022 have seen significant increases in the costs of labor and certain materials and equipment, and longer lead times for such materials and equipment, as a result of availability constraints, supply chain disruption, increased demand, labor shortages associated with a fully employed US labor force, high inflation and other factors. Supply and demand fundamentals have been further aggravated by disruptions in global energy supply caused by multiple geopolitical events, including the ongoing conflict between Russia and Ukraine. Recent supply chain constraints and inflationary pressures have in the past, and may in the future, adversely impact our operating costs, as a result, our business, financial condition, results of operations and cash flows could be materially and adversely affected.
Increases in interest rates or decreases in mortgage availability may make purchasing a home more difficult or less desirable and may negatively impact our ability to sell our custom home.
In general, housing demand is adversely affected by increases in interest rates and a lack of availability of mortgage financing. We expect the buyer of our custom home to finance their home purchase through a third party lender providing mortgage financing. If mortgage interest rates continue to increase and, consequently, the ability of prospective buyers to finance home purchases is adversely affected, we may have a more difficult time selling our custom home. The above risks can also indirectly impact us to the extent our customer needs to sell their existing home to purchase a custom home from us if the potential buyer of their home is unable to obtain mortgage financing.
We may enter into strategic transactions in the future which may result in a material change in our operations and/or a change of control.
The costs and expenses of our public reporting obligations are material, and materially affect our quarterly results of operations and profitability. In the future, we or our majority shareholders, may enter into transactions with parties seeking to merge and/or acquire us and/or our operations. While we have not entered into any agreements or understandings with any such parties to date, in the event that we do enter into such a transaction or transactions in the future, our majority shareholders will likely change and new shares of common stock or preferred stock could be issued resulting in substantial dilution to our then current stockholders. As a result, our new majority shareholders may change the composition of our Board of Directors (currently consisting solely of Mr. May) and replace our current management. Any future transaction may also result in a change in our business focus. We have not entered into any agreements relating to any strategic transaction involving the Company as of the date of this filing and may not enter into such agreements in the future. Any future strategic transaction involving the Company or its operations may have a material effect on our operations, cash flows, results of operations, prospects, plan of operations, the listing of our common stock on the OTCQB Market, our officers, directors and majority shareholders, and the value of our securities.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
There have been no sales of unregistered securities during the quarter ended September 30, 2022 and from the period from October 1, 2022 to the filing date of this Report.
Use of Proceeds From Sale of Registered Securities
None.
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Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information.
The following information was required to be disclosed in a Current Report on Form 8-K during the period covered by this Form 10-Q, but was inadvertently not timely reported by the Company. Instead of filing such information on a separate Current Report on Form 8-K, we have elected to make the following disclosures in this Quarterly Report on Form 10-Q under Items 1.01 and 2.03 of Form 8-K, as applicable:
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information and disclosures in Item 1.01, above, are incorporated by reference into this Item 2.03 in their entirety.
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Item 6. Exhibits
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| Filed/ Furnished |
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| Incorporated by Reference |
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Exhibit Number | Description of Exhibit |
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| Exhibit | Filing Date | File Number | ||||||||||||||||
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| S-1 |
| 3.1 |
| 10/27/2016 | 333-214274 | ||||||||||||||||
8-K | 3.1 | 6/17/2021 | 000-56012 | ||||||||||||||||||||||
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| S-1 |
| 3.2 |
| 10/27/2016 | 333-214274 | ||||||||||||||||
10-K | 4.1 | 4/13/2022 | 000-56012 | ||||||||||||||||||||||
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| S-1 |
| 10.1 |
| 10/27/2016 | 333-214274 | ||||||||||||||||
Voting Agreement, dated as of November 3, 2017, by and among Michael Chavez and Elijah May | 8-K | 10.1 | 11/7/2017 | 333-214274 | |||||||||||||||||||||
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| 10-Q |
| 10.7 |
| 5/19/2020 | 000-56012 | ||||||||||||||||
10-Q | 10.8 | 5/19/2020 | 000-56012 | ||||||||||||||||||||||
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| 10-Q |
| 10.9 |
| 5/19/2020 | 000-56012 | ||||||||||||||||
10-Q | 10.1 | 5/19/2020 | 000-56012 | ||||||||||||||||||||||
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| 10-Q |
| 10.11 |
| 5/19/2020 | 000-56012 | ||||||||||||||||
10-Q | 10.12 | 5/19/2020 | 000-56012 | ||||||||||||||||||||||
| Lock-Up Agreement dated January 27, 2021, between Reliant Holdings, Inc. and Michael Chavez |
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| 10-K |
| 10.9 |
| 3/31/2021 | 000-56012 | |||||||||||||||
8-K | 10.2 | 6/17/2021 | 000-56012 | ||||||||||||||||||||||
| Form of 2021 Equity Incentive Plan Option Award Grant Agreement |
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| S-8 |
| 4.1 |
| 8/3/2021 | 333-258392 | |||||||||||||||
Form of 2021 Equity Incentive Plan Restricted Stock Grant Agreement | S-8 | 4.2 | 8/3/2021 | 333-258392 | |||||||||||||||||||||
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| 10-Q |
| 10.13 |
| 8/16/2021 |
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| 10-K |
| 10.14 |
| 4/13/2022 |
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| 10-Q |
| 10.15 |
| 5/18/2022 |
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| S-1 |
| 14.1 |
| 10/27/2016 |
| 333-214274 |
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101.INS* |
| Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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101.SCH* |
| XBRL Taxonomy Extension Schema Document |
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101.CAL* |
| XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF* |
| XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB* |
| XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE* |
| XBRL Taxonomy Extension Presentation Linkbase Document |
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104* |
| Inline XBRL for the cover page of this Quarterly Report on Form 10-Q included in the Exhibit 101 Inline XBRL Document Set |
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* Filed herewith.
** Furnished Herewith.
† Exhibit constitutes a management contract or compensatory plan or agreement.
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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.
| RELIANT HOLDINGS, INC. |
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Date: November 15, 2022 | By: | /s/ Elijah May |
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| Elijah May |
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| Chief Executive Officer and President |
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| (Principal Executive Officer and Principal Financial/Accounting Officer) |
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EXHIBIT 31.1
CERTIFICATION
I, Elijah May, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Reliant Holdings, Inc.; |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15 (f)) for the registrant and have: |
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| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 15, 2022 | By: | /s/ Elijah May |
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| Elijah May |
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| Chief Executive Officer and President |
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| (Principal Executive Officer and Principal Financial/Accounting Officer) |
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SS. 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Reliant Holdings, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2022, as filed with the Securities and Exchange Commission (the “Report”), I, Elijah May, Principal Executive and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
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| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. |
| Date: November 15, 2022 | By: | /s/ Elijah May |
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| Elijah May |
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| Chief Executive Officer and President |
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| (Principal Executive Officer and Principal Financial/Accounting Officer) |
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