Firsthand Technology Value Fund, Inc 10-K/A, filed Mar 21, 2023
Firsthand Technology Value Fund, Inc. (SVVC)
About this 10-K/A
Firsthand Technology Value Fund, Inc filed this 10-K/A on March 21, 2023, covering the fiscal year ended December 31, 2021.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
For the fiscal year ended
or
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:
(Exact name of registrant as specified in its charter)
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(Address and zip code of principal executive offices)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Name of each exchange on which registered |
The |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [ ] Yes
[X]
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. [ ] Yes [X]
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. [X]
Indicate
by check mark whether the issuer has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act). (check one):
| Large accelerated filer [ ] | Accelerated filer [ ] | Smaller reporting company |
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act). [ ] Yes [X]
The aggregate market value of the Common Stock held by non-affiliates of the registrant as of December 31, 2021 was approximately $
As of March 1, 2022, Firsthand Technology Value Fund had shares of common stock, par value $0.001 per share, outstanding.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
FIRSTHAND TECHNOLOGY VALUE FUND, INC. |
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Date: March 21, 2023 |
By: |
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Kevin Landis President |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
Signatures |
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Title |
Date |
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/s/ Kevin Landis |
Chairman of the Board, Chief Executive Officer, and Chief Financial Officer |
March 21, 2023 |
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Kevin Landis |
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* |
Director |
March 21, 2023 |
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Greg Burglin |
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* |
Director |
March 21, 2023 |
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Kimun Lee |
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* |
Director |
March 21, 2023 |
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Nicholas Petredis |
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* |
Director |
March 21, 2023 |
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Rodney Yee |
* Signed by Kevin Landis pursuant to powers of attorney.
EXHIBIT INDEX
Exhibit Number |
Descriptions |
| 3.1 | |
| 10.2 | |
| 24.1 | |
| 99.2 | |
| 99.4 | Separate financial statements of Wrightspeed Inc. filed pursuant to Rule 3-09 and 4-08(g) of regulations S-X filed herewith. |
Certification of Chief Executive Officer
Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a)
I, Kevin Landis, certify that:
| 1. I have reviewed the Annual Report on Form 10-K/A of Firsthand Technology Value Fund, Inc.; |
| 2. Based on my knowledge, this report does not contain any untrue statement or 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; |
| 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; |
| 4. The registrant’s other certifying officer(s) and I are 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: |
| (a) Designed such disclosure controls and procedures, or caused such disclosure control and procedures to be designed under our supervision, to ensure 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; |
| (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; |
| (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 |
| (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. |
| 5. The registrant’s other certifying officer(s) and I have disclosed, based on our 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): |
| (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 |
| (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. |
| /s/ Kevin Landis | |
| Name: Kevin Landis | |
| Title: Chief Executive Officer | |
| Dated: March 21, 2023 |
Certification of Chief Financial Officer
Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a)
I, Omar Billawala, certify that:
| 1. I have reviewed the Annual Report on Form 10-K/A of Firsthand Technology Value Fund, Inc.; |
| 2. Based on my knowledge, this report does not contain any untrue statement or 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; |
| 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; |
| 4. The registrant’s other certifying officer(s) and I are 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: |
| (a) Designed such disclosure controls and procedures, or caused such disclosure control and procedures to be designed under our supervision, to ensure 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; |
| (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; |
| (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 |
| (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. |
| 5. The registrant’s other certifying officer(s) and I have disclosed, based on our 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): |
| (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 |
| (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. |
| /s/ Omar Billawala | |
| Name: Omar Billawala | |
| Title: Chief Financial Officer | |
| Dated: March 21, 2023 |
Certification of CEO and CFO Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-K/A of Firsthand Technology Value Fund, Inc. (the “Company”) for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Kevin Landis and Omar Billawala, as Chief Executive Officer and Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
(1) The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 134; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Kevin Landis | |
| Name: Kevin Landis | |
| Title: Chief Executive Officer | |
| Dated: March 21, 2023 | |
| /s/ Omar Billawala | |
| Name: Omar Billawala | |
| Title: Chief Financial Officer | |
| Dated: March 21, 2023 |
WRIGHTSPEED, INC.
Financial Statements
For the Year Ended December 31, 2021
AUDITED
(Expressed in US Dollars $)
Index to Financial Statements
| Page | |
| INDEPENDENT ACCOUNTANT’S AUDIT REPORT | 1 |
| FINANCIAL STATEMENTS: | |
| Balance Sheet | 3 |
| Statement of Operations | 4 |
| Statement of Changes in Stockholders’ Equity | 5 |
| Statement of Cash Flows | 6 |
| Notes to Financial Statements | 7 |
INDEPENDENT ACCOUNTANT’S AUDIT REPORT
To the Board of Directors
Wrightspeed, Inc.
Alameda, California
Opinion
We have audited the financial statements of Wrightspeed, Inc., which comprise the balance sheets as of December 31, 2021, and the related statements of income, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Wrightspeed, Inc., as of December 31, 2021, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Wrightspeed, Inc. and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Wrightspeed Inc.’s ability to continue as a going concern for period of twelve months from the end of the year ended December 31, 2020.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users made on the basis of these financial statements.
In performing an audit in accordance with GAAS, we:
| • | Exercise professional judgment and maintain professional skepticism throughout the audit. |
| • | Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. |
| • | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Wrightspeed, Inc.’s internal control. Accordingly, no such opinion is expressed. |
| • | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. |
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| • | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Wrightspeed, Inc.’s ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.
Going Concern
As discussed in Note 14, certain conditions indicate that the Company may be unable to continue as a going concern. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
November 8, 2022
Los Angeles, California
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WRIGHTSPEED INC.
Balance Sheet
| As of December 31, | 2021 | |||
| (USD $ in Dollars) | ||||
| ASSETS | ||||
| Current Assets: | ||||
| Cash & Cash Equivalents | $ | 1,535,464 | ||
| Inventory | 2,151,828 | |||
| Prepaids and Other Current Assets | 510,955 | |||
| Total Current Assets | 4,198,248 | |||
| Property and Equipment, net | 322,608 | |||
| Deposits | 60,607 | |||
| Total Assets | $ | 4,581,463 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
| Current Liabilities: | ||||
| Accounts Payable | $ | 650,388 | ||
| Current Portion of Loans and Notes | 628,503 | |||
| Current Portion of Convertible Note | 25,118,312 | |||
| Accrued Interest on Convertible Note | 4,421,242 | |||
| Other Current Liabilities | 1,116,439 | |||
| Total Current Liabilities | 31,934,883 | |||
| Warrant Liabilities | 134,311 | |||
| Total Liabilities | 32,069,194 | |||
| STOCKHOLDERS EQUITY | ||||
| Common Stock | 39 | |||
| Series AA Preferred Stock | 641 | |||
| Equity Issuance Costs | (237,452 | ) | ||
| Additional Paid in Capital | 20,617,468 | |||
| Retained Earnings/(Accumulated Deficit) | (47,868,429 | ) | ||
| Total Stockholders' Equity | (27,487,731 | ) | ||
| Total Liabilities and Stockholders' Equity | $ | 4,581,463 | ||
See accompanying notes to financial statements.
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WRIGHTSPEED INC.
Statements of Operations
| For Fiscal Year Ended December 31, | 2021 | |||
| (USD $ in Dollars) | ||||
| Net Revenue | $ | - | ||
| Cost of Goods Sold | - | |||
| Gross profit | - | |||
| Operating expenses | ||||
| General and Administrative | 3,703,158 | |||
| Research and Development | 6,787,517 | |||
| Sales and Marketing | 841,579 | |||
| Total operating expenses | 11,332,253 | |||
| Operating Income/(Loss) | (11,332,253 | ) | ||
| Interest Expense | 2,415,990 | |||
| Other Loss/(Income) | (5 | ) | ||
| Income/(Loss) before provision for income taxes | (13,748,238 | ) | ||
| Provision/(Benefit) for income taxes | - | |||
| Net Income/(Net Loss) | $ | (13,748,238 | ) | |
See accompanying notes to financial statements.
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WRIGHTSPEED INC.
Statements of Changes in Stockholders’ Equity
| Common Stock | Series AA Preferred Stock | Additional Paid In | Equity Issuance | Retained earnings/(Accumulated | Total Shareholder | |||||||||||||||||||||||||||
| (in , $US) | Shares | Amount | Shares | Amount | Capital | Costs | Deficit) | Equity | ||||||||||||||||||||||||
| Balance—December 31, 2020 | 2,974,943 | $ | 30 | 64,140,944 | $ | 641 | $ | 20,590,301 | $ | (237,452 | ) | $ | (34,120,190 | ) | $ | (13,766,670 | ) | |||||||||||||||
| Issuance of Stock | 964,372 | 10 | - | - | 27,167 | 27,177 | ||||||||||||||||||||||||||
| Share-Based Compensation | - | - | ||||||||||||||||||||||||||||||
| Net income/(loss) | (13,748,238 | ) | (13,748,238 | ) | ||||||||||||||||||||||||||||
| Balance—December 31, 2021 | 3,939,315 | $ | 39 | 64,140,944 | $ | 641 | $ | 20,617,468 | $ | (237,452 | ) | $ | (47,868,429 | ) | $ | (27,487,731 | ) | |||||||||||||||
See accompanying notes to financial statements.
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WRIGHTSPEED INC.
Statements of Cash Flows
| For Fiscal Year Ended December 31, | 2021 | |||
| (USD $ in Dollars) | ||||
| CASH FLOW FROM OPERATING ACTIVITIES | ||||
| Net income/(loss) | $ | (13,748,238 | ) | |
| Adjustments to reconcile net income to net cash provided/(used) by operating activities: | ||||
| Depreciation of Property | 905,533 | |||
| Share-based Compensation | - | |||
| Changes in operating assets and liabilities: | ||||
| Inventory | 544,816 | |||
| Prepaids and Other Current Assets | (110,255 | ) | ||
| Accounts Payable | (648,294 | ) | ||
| Accrued Interest on Convertible Note | 2,407,241 | |||
| Warrant Liabilities | ||||
| Other Current Liabilities | (281,341 | ) | ||
| Net cash provided/(used) by operating activities | (10,930,539 | ) | ||
| CASH FLOW FROM INVESTING ACTIVITIES | ||||
| Purchases of Property and Equipment | (40,961 | ) | ||
| Net cash provided/(used) in investing activities | (40,961 | ) | ||
| CASH FLOW FROM FINANCING ACTIVITIES | ||||
| Capital Contribution | 27,177 | |||
| Borrowing on Promissory Notes and Loans | ||||
| Repayment of Promissory Notes and Loans | (97,640 | ) | ||
| Borrowing on Convertible Notes | 10,600,061 | |||
| Net cash provided/(used) by financing activities | 10,529,598 | |||
| Change in Cash | (441,902 | ) | ||
| Cash—beginning of year | 2,037,974 | |||
| Cash—end of year | $ | 1,596,072 | ||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||
| Cash paid during the year for interest | $ | - | ||
| Cash paid during the year for income taxes | $ | - | ||
| OTHER NONCASH INVESTING AND FINANCING ACTIVITIES AND SUPPLEMENTAL DISCLOSURES | ||||
| Purchase of property and equipment not yet paid for | $ | - | ||
| Issuance of equity in return for note | - | |||
| Issuance of equity in return for accrued payroll and other liabilities | ||||
See accompanying notes to financial statements.
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WRIGHTSPEED INC.
Notes to Financial Statements
For Year Ended to December 31, 2021
| 1. | NATURE OF OPERATIONS |
Wrightspeed Inc. was incorporated on January 4, 2005, in the state of Delaware. The financial statements of Wrightspeed Inc. (which may be referred to as the “Company”, “we”, “us”, or “our”) are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company’s headquarters are located in Alameda, California.
Wrightspeed is providing the safest, cleanest, most affordable electric powertrain for Class 6 & 7 commercial vehicles. We achieve this through our Powertrain-in-a-Crate tm kit which replaces the existing powertrain in a vehicle. We intend to generate revenue and profit margin by selling our Powertrain-in-a-Crate kits directly to commercial vehicle customers via the dealerships that will install the kits. The end customers are fleets of medium-duty delivery and work trucks, or fleets of transit or school buses.
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation
The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“US GAAP”). The Company has adopted the calendar year as its basis of reporting.
Use of Estimates
The preparation of financial statements in conformity with United States GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include all cash in banks. The Company’s cash is deposited in demand accounts at financial institutions that management believes are creditworthy. The Company’s cash and cash equivalents in bank deposit accounts, at times, may exceed federally insured limits. As of December 31, 2021, the Company’s cash and cash equivalents exceeded FDIC insured limits by $1,787,974.
Inventories
Inventories are valued at the lower of cost and net realizable value. Costs related to finished goods and work in progress which are determined using an average method.
Property and Equipment
Property and equipment are stated at cost. Normal repairs and maintenance costs are charged to earnings as incurred and additions and major improvements are capitalized. The cost of assets retired or otherwise disposed of and the related depreciation are eliminated from the accounts in the period of disposal and the resulting gain or loss is credited or charged to earnings.
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WRIGHTSPEED INC.
Notes to Financial Statements
For Year Ended to December 31, 2021
Depreciation is computed over the estimated useful lives of the related asset type or term of the operating lease using the straight-line method for financial statement purposes. The estimated service lives for property and equipment are as follows:
| Category | Useful Life |
| Machinery and Equipment | 5 years |
| Tooling | 5 years |
| Computer Equipment | 5 years |
| Software | 5 years |
| Automobile | 5 years |
| Leasehold Improvement | 15 years |
| Trade Show Equipment | 5 years |
Impairment of Long-lived Assets
Long-lived assets, such as property and equipment and identifiable intangibles with finite useful lives, are periodically evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We look for indicators of a trigger event for asset impairment and pay special attention to any adverse change in the extent or manner in which the asset is being used or in its physical condition. Assets are grouped and evaluated for impairment at the lowest level of which there are identifiable cash flows, which is generally at a location level. Assets are reviewed using factors including, but not limited to, our future operating plans and projected cash flows. The determination of whether impairment has occurred is based on an estimate of undiscounted future cash flows directly related to the assets, compared to the carrying value of the assets. If the sum of the undiscounted future cash flows of the assets does not exceed the carrying value of the assets, full or partial impairment may exist. If the asset carrying amount exceeds its fair value, an impairment charge is recognized in the amount by which the carrying amount exceeds the fair value of the asset. Fair value is determined using an income approach, which requires discounting the estimated future cash flows associated with the asset.
Income Taxes
Wrightspeed Inc. is a C corporation for income tax purposes. The Company accounts for income taxes under the liability method, and deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided on deferred tax assets if it is determined that it is more likely than not that the deferred tax asset will not be realized. The Company records interest, net of any applicable related income tax benefit, on potential income tax contingencies as a component of income tax expense. The Company records tax positions taken or expected to be taken in a tax return based upon the amount that is more likely than not to be realized or paid, including in connection with the resolution of any related appeals or other legal processes. Accordingly, the Company recognizes liabilities for certain unrecognized tax benefits based on the amounts that are more likely than not to be settled with the relevant taxing authority. The Company recognizes interest and/or penalties related to unrecognized tax benefits as a component of income tax expense.
Concentration of Credit Risk
The Company maintains its cash with a major financial institution located in the United States of America which it believes to be creditworthy. Balances are insured by the Federal Deposit Insurance Corporation up to $250,000. At times, the Company may maintain balances in excess of the federally insured limits.
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WRIGHTSPEED INC.
Notes to Financial Statements
For Year Ended to December 31, 2021
Revenue Recognition
The Company is currently pre-revenue and will follow the provisions and the disclosure requirements described in ASU 2014-09 also referred to as Topic 606. Revenue recognition, according to Topic 606, is determined using the following steps: Recognition of revenue when, or how, a performance obligation is met: Revenues are recognized when or as control of the promised goods or services is transferred to customers.
ASC Topic 606, “Revenue from Contracts with Customers” establishes principles for reporting information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers.
Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
| 1) | Identify the contract with a customer |
| 2) | Identify the performance obligations in the contract |
| 3) | Determine the transaction price |
| 4) | Allocate the transaction price to performance obligations in the contract; and |
| 5) | Recognize revenue as the performance obligation is satisfied. |
The Company intends to generate revenue and profit margin by selling Powertrain-in-a-Crate kits directly to commercial vehicle customers via the dealerships that will install the kits. The end customers are fleets of medium-duty delivery and work trucks, or fleets of transit or school buses.
Advertising and Promotion
Advertising and promotional costs are expensed as incurred. Advertising and promotional expenses for the years ended December 31, 2021, amounted to $841,579, which is included in sales and marketing expenses.
Research and Development Costs
Costs incurred in the research and development of the Company’s products are expensed as incurred.
Stock-Based Compensation
The Company accounts for stock-based compensation to both employee and non-employees in accordance with ASC 718, Compensation - Stock Compensation. Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period, which is generally the option vesting period. The Company uses the Black-Scholes option pricing model to determine the fair value of stock options.
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WRIGHTSPEED INC.
Notes to Financial Statements
For Year Ended to December 31, 2021
Fair Value of Financial Instruments
The carrying value of the Company’s financial instruments included in current assets, and current liabilities (such as cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value due to the short-term nature of such instruments).
The inputs used to measure fair value are based on a hierarchy that prioritizes observable and unobservable inputs used in valuation techniques. These levels, in order of highest to lowest priority, are described below:
Level 1—Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2—Observable prices that are based on inputs not quoted on active markets but corroborated by market data.
Level 3—Unobservable inputs reflecting the Company’s assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
COVID-19
In March 2020, the outbreak and spread of the COVID-19 virus was classified as a global pandemic by the World Health Organization. This widespread disease impacted the Company’s business operations, including its employees, customers, vendors, and communities. The COVID-19 pandemic may continue to impact the Company’s business operations and financial operating results, and there is substantial uncertainty in the nature and degree of its continued effects over time. The extent to which the pandemic impacts the business going forward will depend on numerous evolving factors management cannot reliably predict, including the duration and scope of the pandemic; governmental, business, and individuals' actions in response to the pandemic; and the impact on economic activity including the possibility of recession or financial market instability. These factors may adversely impact consumer and business spending on products as well as customers' ability to pay for products and services on an ongoing basis. This uncertainty also affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions, including investments, receivables, and forward-looking guidance.
Subsequent Events
The Company considers events or transactions that occur after the balance sheet date, but prior to the issuance of the financial statements to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated through November 8, 2022, which is the date the financial statements were issued.
Recently Issued and Adopted Accounting Pronouncements
FASB issued ASU No. 2019-02, leases, that requires organizations that lease assets, referred to as "lessees", to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with lease terms of more than twelve months. ASU 2019-02 will also require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases and will include qualitative and quantitative requirements.
The new standard for nonpublic entities will be effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, and early application is permitted. We are currently evaluating the effect that the updated standard will have on the financial statements and related disclosures.
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WRIGHTSPEED INC.
Notes to Financial Statements
For Year Ended to December 31, 2021
The FASB issues ASUs to amend the authoritative literature in ASC. There have been a number of ASUs to date, including those above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact on our financial statements.
| 3. | INVENTORY |
Inventory consists of the following items:
| As of Year Ended December 31, | 2021 | |||
| Finished goods | 1,980,906 | |||
| Work in progress | 170,922 | |||
| Total Inventory | $ | 2,151,828 | ||
| 4. | DETAILS OF CERTAIN ASSETS AND LIABILITIES |
Accounts payable consist primarily of trade payables. Prepaid and other current assets consist of the following items:
| As of Year Ended December 31, | 2021 | |||
| Prepaid expenses | 510,955 | |||
| Total Prepaids and Other Current Assets | $ | 510,955 | ||
Other current liabilities consist of the following items:
| As of Year Ended December 31, | 2021 | |||
| Accrued Expense | 260,172 | |||
| Sales Tax Payable | 3,067 | |||
| Deferred Rent | 87,967 | |||
| FSA Deferral | 129 | |||
| Customer Deposit | 764,895 | |||
| Other current liabilities | 208 | |||
| Total Other Current Liabilities | $ | 1,116,439 | ||
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WRIGHTSPEED INC.
Notes to Financial Statements
For Year Ended to December 31, 2021
| 5. | PROPERTY AND EQUIPMENT |
As of December 31, 2021, property and equipment consists of:
| As of Year Ended December 31, | 2021 | |||
| Machinery and Equipment | $ | 565,230 | ||
| Tooling | 887,773 | |||
| Computer Equipment | 141,727 | |||
| Software | 9,987 | |||
| Automobile | 94,633 | |||
| Leasehold Improvement | 4,219,210 | |||
| Trade Show Equipment | 7,772 | |||
| Property and Equipment, at Cost | 5,926,333 | |||
| Accumulated depreciation | (5,603,726 | ) | ||
| Property and Equipment, Net | $ | 322,608 | ||
Depreciation expenses for property and equipment for the fiscal year ended December 31, 2021, were in the amount of $905,533.
| 6. | CAPITALIZATION AND EQUITY TRANSACTIONS |
Common Stock
The Company is authorized to issue 89,532,869 shares of Common Shares with a par value of $0.00001. As of December 31, 2021, 3,939,315 shares have been issued and are outstanding.
Preferred Stock
The Company is authorized to issue 65,807,580 shares of Preferred Shares with a $0.00001 par value. As of December 31, 2021, 64,140,944 shares of Preferred Shares have been issued and are outstanding.
| 7. | SHAREBASED COMPENSATION |
During 2010, the Company authorized the Stock Option Plan (which may be referred to as the “Plan”). The Company reserved 12,170,371 shares of its Common Stock pursuant to the plan, which provides for the grant of shares of stock options, stock appreciation rights, and stock awards (performance shares) to employees, non-employee directors, and non-employee consultants. The option exercise price generally may not be less than the underlying stock's fair market value at the date of the grant and generally have a term of four years. The amounts granted each calendar year to an employee or nonemployee is limited depending on the type of award.
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WRIGHTSPEED INC.
Notes to Financial Statements
For Year Ended to December 31, 2021
Stock Options
The Company granted stock options. The stock options were valued using the Black-Scholes pricing model with a range of inputs indicated below:
| As of Year Ended December 31, | 2021 |
| Expected life (years) | 10.00 |
| Risk-free interest rate | 2.50% |
| Expected volatility | 75% |
| Annual dividend yield | 0% |
The risk-free interest rate assumption for options granted is based upon observed interest rates on the United States Government securities appropriate for the expected term of the Company's employee stock options.
The expected term of employee stock options is calculated using the simplified method which takes into consideration the contractual life and vesting terms of the options.
The Company determined the expected volatility assumption for options granted using the historical volatility of comparable public company's Common Stock. The Company will continue to monitor peer companies and other relevant factors used to measure expected volatility for future stock option grants, until such time that the Company’s Common Stock has enough market history to use historical volatility.
The dividend yield assumption for options granted is based on the Company's history and expectation of dividend payouts. The Company has never declared or paid any cash dividends on its common stock, and the Company does not anticipate paying any cash dividends in the foreseeable future.
Management estimated the fair value of Common Stock based on recent sales to third parties. Forfeitures are recognized as incurred.
A summary of the Company’s stock options activity and related information is as follows:
| Number of Awards | Weighted Average Exercise | Weighted Average Contract Term | |||||||||||
| Outstanding at December 31, 2020 | 1,669,296 | $ | 0.02 | 6.60 | |||||||||
| Granted | - | $ | - | ||||||||||
| Execised | - | $ | - | ||||||||||
| Expired/Cancelled | - | $ | - | ||||||||||
| Outstanding at December 31, 2021 | 1,669,296 | $ | 0.02 | 5.60 | |||||||||
| Exercisable Options at December 31, 2021 | 1,669,296 | $ | 0.02 | 5.60 | |||||||||
Stock option expenses for the years ended December 31, 2021, was $0.
| 8. | WARRANT LIABILITIES |
During 2017 and 2018, the Company issued 2,905 warrants to purchase Common Stock and 1,666,391 warrants to purchase Preferred Stock. Management determined that the warrants are puttable for cash upon a fundamental transaction at the option of the holder and as such required classification as a liability. In accordance with the accounting guidance, the outstanding warrants are recognized as a warrant liability on the balance sheet and are measured at their inception date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other income in the statement of operations. As of December 31, 2021, the outstanding balance of warrant liabilities amounted to $134,311.
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WRIGHTSPEED INC.
Notes to Financial Statements
For Year Ended to December 31, 2021
| 9. | DEBT |
Promissory Notes & Loans
On May 3, 2020, the Company entered into PPP loan agreement, the details and the terms are as follows:
| For the Year Ended December 2021 | ||||||||||||||||||||||||||||||||||
| Debt Instrument Name | Principal Amount | Interest Rate | Borrowing Period | Maturity Date | Interest Expense | Accrued Interest | Current Portion | Non-Current Portion | Total Indebtedness | |||||||||||||||||||||||||
| PPP Loan Payable | $ | 721,419 | 1.00 | % | 5/3/2020 | 5/3/2022 | $ | 7,214 | $ | 7,214 | $ | 621,289 | $ | - | $ | 621,289 | ||||||||||||||||||
| Total | $ | 7,214 | $ | 7,214 | $ | 621,289 | $ | - | $ | 621,289 | ||||||||||||||||||||||||
On June 28, 2022, the Company received full forgiveness of PPP loan. See Footnote 13 (Subsequent Events) for details.
Convertible Note(s)
Below are the details of the convertible notes:
| For the Year Ended December 2021 | ||||||||||||||||||||||||||||||||||
| Debt Instrument Name | Principal Amount | Interest Rate | Borrowing Period | Maturity Date | Interest Expense | Accrued Interest | Current Portion | Non-Current Portion | Total Indebtedness | |||||||||||||||||||||||||
| 2018 Convertible Notes | $ | 2,879,398 | 15.00 | % | 12/31/2018 | 12/31/2021 | 431,910 | 1,296,913 | 2,879,398 | - | 4,176,311 | |||||||||||||||||||||||
| 2019 Convertible Notes | $ | 5,383,764 | 12.00 | % | 06/07/2019 | 12/31/2021 | 655,024 | 1,683,323 | 5,383,764 | - | 7,067,087 | |||||||||||||||||||||||
| 2020 Convertible Notes | $ | 6,288,227 | 12.00 | % | 08/12/2020 | 12/31/2021 | 765,067 | 885,776 | 6,288,227 | - | 7,174,003 | |||||||||||||||||||||||
| 2021 Convertible Notes | $ | 10,600,000 | 12.00 | % | 02/23/2021 | 12/31/2021 | 555,230 | 555,230 | 10,600,000 | - | 11,155,230 | |||||||||||||||||||||||
| Total | $ | - | $ | 2,407,231 | $ | 4,421,242 | $ | 25,151,390 | $ | - | $ | 29,572,632 | ||||||||||||||||||||||
The convertible notes are convertible into common shares at a conversion price. The conversion price shall mean a price per share equal to eighty percent (80%) of the lowest price per share paid by investors in the Qualifying Financing. Since the conversion feature is convertible into variable number of shares and does not have fixed-for-fixed features, the conversion feature was not bifurcated and recorded separately.
| 10. | INCOME TAXES |
The provision for income taxes for the year ended December 31, 2021, consists of the following:
| As of Year Ended December 31, | 2021 | |||
| Net Operating Loss | $ | (4,102,474 | ) | |
| Valuation Allowance | 4,102,474 | |||
| Net Provision for income tax | $ | - | ||
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WRIGHTSPEED INC.
Notes to Financial Statements
For Year Ended to December 31, 2021
Significant components of the Company’s deferred tax assets and liabilities on December 31, 2021are as follows:
| As of Year Ended December 31, | 2021 | |||
| Net Operating Loss | $ | (9,922,889 | ) | |
| Valuation Allowance | 9,922,889 | |||
| Total Deferred Tax Asset | $ | - | ||
Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. On the basis of this evaluation, the Company has determined that it is more likely than not that the Company will not recognize the benefits of the federal and state net deferred tax assets, and, as a result, full valuation allowance has been set against its net deferred tax assets as of December 31, 2021. The amount of the deferred tax asset to be realized could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased.
For the fiscal year ending December 31, 2021, the Company had federal cumulative net operating loss (“NOL”) carryforwards of $33,253,650, and the Company had state net operating loss (“NOL”) carryforwards of approximately $33,253,650. Utilization of some of the federal and state NOL carryforwards to reduce future income taxes will depend on the Company’s ability to generate sufficient taxable income prior to the expiration of the carryforwards. The federal net operating loss carryforward is subject to an 80% limitation on taxable income, does not expire, and will carry on indefinitely.
The Company recognizes the impact of a tax position in the financial statements if that position is more likely than not to be sustained on a tax return upon examination by the relevant taxing authority, based on the technical merits of the position. As of December 31, 2021, the Company had no unrecognized tax benefits.
The Company recognizes interest and penalties related to income tax matters in income tax expense. As of December 31, 2021, the Company had no accrued interest and penalties related to uncertain tax positions.
| 11. | RELATED PARTY |
The Company issued convertible notes to a related party and has incurred related accrued interest as follows:
| Principal | Accrued Interest through December 31, 2021 | Total | ||||||||||
| 2019 Convertible notes | $ | 4,929,015 | $ | 1,541,139 | $ | 6,470,153 | ||||||
| 2020 Convertible notes | 5,875,000 | 830,325 | 6,705,325 | |||||||||
| 2021 Convertible notes | 10,600,000 | 555,300 | 11,155,300 | |||||||||
| $ | 21,404,015 | $ | 2,926,764 | $ | 24,330,778 | |||||||
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WRIGHTSPEED INC.
Notes to Financial Statements
For Year Ended to December 31, 2021
| 12. | COMMITMENTS AND CONTINGENCIES |
Operating Leases
On December 18, 2014, the Company entered into a lease agreement with City of Alameda to rent Building 41 located within Alameda, California. The commencement date of the lease is February 1, 2015 and expires on January 31, 2022. The annual rent starts from $46,995.99. The aggregate minimum annual lease payments under operating leases in effect on December 31, 2021, are as follows:
| Year | Obligation | ||||
| 2022 | $ | 4,676 | |||
| 2023 | - | ||||
| 2024 | - | ||||
| 2025 | - | ||||
| Thereafter | - | ||||
| Total future minimum operating lease payments | $ | 4,676 | |||
Rent expenses were in the amount of $364,643 as of December 31, 2021.
Contingencies
The Company’s operations are subject to a variety of local and state regulation. Failure to comply with one or more of those regulations could result in fines, restrictions on its operations, or losses of permits that could result in the Company ceasing operations.
Litigation and Claims
From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As of December 31, 2021, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s operations.
| 13. | SUBSEQUENT EVENTS |
The Company has evaluated subsequent events for the period from December 31, 2021, through November 8, 2022, which is the date the financial statements were available to be issued.
From February 23, 2022, until November 8, 2022, the Company issued thirteen (13) Convertible Notes in the aggregate amount of $2,835,000 to a related party. The notes bear interest rates of 12% and have a maturity date set on December 31, 2022.
On June 28, 2022, the Company received forgiveness of a portion of its PPP loan, which included the principal of $532,345 and the interest of $11,405. On August 11, 2022, the company was informed by Wells Fargo Bank, National Association, it has also received forgiveness of the remaining portion of PPP loan which the Company has previously repaid, amounted to $193,352.77 which includes principal and interest. The Company expects to receive that amount in the near future.
During 2022, through the date of this report, the Company issued an additional 554, 048 shares of Common Stock through the Employee Incentive Plan.
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WRIGHTSPEED INC.
Notes to Financial Statements
For Year Ended to December 31, 2021
There have been no other events or transactions during this time which would have a material effect on these financial statements.
| 14. | GOING CONCERN |
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has a net operating loss of $12,717,261, an operating cash flow loss of $10,825,730, and liquid assets in cash of $1,596,072, which less than a year’s worth of cash reserves as of December 31, 2021. These factors normally raise doubt about the Company’s ability to continue as a going concern.
The Company’s ability to continue as a going concern in the next twelve months following the date the financial statements were available to be issued is dependent upon its ability to produce revenues and/or obtain financing sufficient to meet current and future obligations and deploy such to produce profitable operating results.
Management has evaluated these conditions and plans to generate revenues and raise capital as needed to satisfy its capital needs. During the next twelve months, the Company intends to fund its operations through debt and/or equity financing.
There are no assurances that management will be able to raise capital on terms acceptable to the Company. If it is unable to obtain sufficient amounts of additional capital, it may be required to reduce the scope of its planned development, which could harm its business, financial condition, and operating results. The accompanying financial statements do not include any adjustments that might result from these uncertainties.
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