10-Q 1 form10-q.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended September 30, 2023

 

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 No. 333-218248

 

FORGE INNOVATION DEVELOPMENT CORP.

(Exact name of small business issuer as specified in its charter)

 

nevada   81-4635390
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

6280 Mission Blvd Unit 205

Jurupa Valley, CA 92509

(Address of principal executive offices)

 

(626) 986-4566

(Registrant’s telephone number, including area code)

 

N/A

( Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Not applicable   Not applicable   Not applicable

 

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. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

  Large accelerated filer ☐ Accelerated filer ☐  
  Non-accelerated filer Smaller reporting company  
    Emerging growth company  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No

 

The number of shares of Common Stock, $0.0001 par value of the registrant outstanding on November 13, 2023, was 50,389,011.

 

 

 

 
 

 

FORGE INNOVATION DEVELOPMENT CORP.

 

QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 2023

 

TABLE OF CONTENTS

 

  PAGE
   
Part I. FINANCIAL INFORMATION:  
   
Item 1. Condensed Financial Statements: 1
   
Consolidated Balance Sheets, September 30, 2023 (unaudited) and December 31, 2022 2
   
Consolidated Statements of Operations (unaudited) for the Three and Nine Months ended September 30, 2023 and 2022 3
   
Consolidated Statements of Cash Flows (unaudited) for the Three and Nine Months ended September 30, 2023 and 2022 4
   
Consolidated Statements of Changes in Equity (Deficit) (unaudited) for the Three and Nine Months ended September 30, 2023 and 2022 5
   
Notes to Condensed Consolidated Financial Statements (unaudited) 6
   
Item 2. Management’s Discussion and Analysis and Plan of Operation 12
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
   
Item 4. Controls and Procedures 14
   
Part II. OTHER INFORMATION:  
   
Item 1. Legal Proceedings 15
   
Item 1A. Risk Factors 15
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 15
   
Item 3. Defaults Upon Senior Securities 15
   
Item 4. Mine Safety Disclosures 15
   
Item 5. Other Information 15
   
Item 6. Exhibits 16
   
SIGNATURES 17
   
EXHIBIT INDEX 18

 

i
 

 

PART I

 

ITEM 1. FINANCIAL STATEMENTS

 

FORGE INNOVATION DEVELOPMENT CORP.

 

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Consolidated Balance Sheets, September 30, 2023 (unaudited) and December 31, 2022 2
   
Consolidated Statements of Operations (unaudited) for the Three and Nine Months ended September 30, 2023 and 2022 3
   
Consolidated Statements of Cash Flows (unaudited) for the Three and Nine Months ended September 30, 2023 and 2022 4
   
Consolidated Statements of Changes in Equity (Deficit) (unaudited) for the Three and Nine Months ended September 30, 2023 and 2022 5
   
Notes to Condensed Consolidated Financial Statements (Unaudited) 6

 

1
 

 

FORGE INNOVATION DEVELOPMENT CORP. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

           
   September 30,   December 31, 
   2023   2022 
   (Unaudited)     
ASSETS          
CURRENT ASSETS          
Cash  $10,686   $11,734 
Account receivable   109,509    - 
Deferred share-based compensation   1,423,014    - 
Prepaid expense and other current assets   93,923    16,521 
           
Total Current Assets   1,637,132    28,255 
           
NONCURRENT ASSETS          
Property and equipment, net   68,812    83,636 
Real estate investments, net   8,162,521    - 
Rent deposit   -    13,953 
Total Non-Current Assets   8,231,333    97,589 
TOTAL ASSETS  $9,868,465   $125,844 
           
LIABILITIES AND EQUITY (DEFICIT)          
CURRENT LIABILITIES:          
Accounts payable and accrued liabilities  $133,537   $4,029 
Due to related parties   944,334    60,000 
Unearned revenue   40,998    13,124 
Rent payable, current   45,294    83,070 
Loan payables   394,809    8,236 
           
Total Current Liabilities   1,558,972    168,459 
           
Security deposits payable   121,893    - 
Rent payable   40,000    - 
Long term portion of Chase auto loan   30,186    36,222 
Long term portion of SBA loan   11,881    12,502 
Commercial loan   4,119,950    - 
TOTAL LIABILITIES   5,882,882    217,183 
           
COMMITMENTS AND CONTINGENCIES   -      
           
EQUITY (DEFICIT)          
Preferred stock, $.0001 par value, 50,000,000 shares authorized; no share issued and outstanding   -    - 
Common stock, $.0001 par value, 200,000,000 shares authorized, 50,389,011 and 45,621,868 shares issued and outstanding   5,039    4,562 
Additional paid-in capital   4,806,201    1,469,678 
Accumulated deficit   (1,912,844)   (1,565,579)
Total Forge Stockholders’ Equity (Deficit)   2,898,396    (91,339)
Noncontrolling interests   1,087,187    - 
Total Equity (Deficit)   3,985,583    (91,339)
TOTAL LIABILITIES AND EQUITY   $9,868,465   $125,844 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

2
 

 

FORGE INNOVATION DEVELOPMENT CORP. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

(Unaudited)

 

                     
   For the Three Months Ended
September 30,
   For the Nine Months Ended
September 30,
 
   2023   2022   2023   2022 
                 
Revenues                    
Property management income  $   $   $   $5,863 
Property management income from a related party       37,000    45,000    77,000 
Rent income   132,760        265,770     
Total revenues   132,760    37,000    310,770    82,863 
                     
Operating Expenses                    
Professional expenses   20,000    9,800    56,400    29,400 
Depreciation expense   68,884    3,372    190,731    11,745 
Share-based compensation   494,027        536,986     
Selling, general and administrative expenses   50,499    26,629    148,890    87,100 
Property operating   40,354        92,364     
                     
Total operating expenses   673,764    39,801    1,025,371    128,245 
                     
Other income (expenses):                    
Interest expense and loan fee, net   (128,520)       (333,283)    
Gain on bargain purchase           487,688     
Gain on debt settlement               3,284 
Gain on sale of property and equipment       6,874        6,874 
Other income (expense), net   3,919    938    (22,882)   938 
Total other (expense) income, net   (124,601)   7,812    131,523    11,096 
                     
Net (loss) income before income tax   (665,605)   5,011    (583,078)   (34,286)
Income tax expense       (1,372)       (2,172)
                     
Net (loss) income  $(665,605)  $3,639   $(583,078)  $(36,458)
Net loss attributable to non-controlling interests in a subsidiary   (81,880)       (235,813)    
Net (loss) income attributable to common stockholders  $(583,725)  $3,639   $(347,265)  $(36,458)
                     
Weighted average shares outstanding:                    
Basic and diluted   50,389,011    45,621,868    47,982,763    45,621,868 
                     
Earnings per share:                    
Basic and diluted  $(0.01)  $0.00   $(0.01)   (0.00)

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

3
 

 

FORGE INNOVATION DEVELOPMENT CORP. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(Unaudited)

 

           
  

For the nine months ended

September 30,

 
   2023   2022 
CASH FLOWS FROM OPERATING ACTIVITIES          
Net loss  $(583,078)  $(36,458)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation expense   190,731    11,745 
Share-based compensation   536,986     
Gain on sale of property and equipment       (6,874)
Gain on bargain purchase   (487,688)    
Change in operating assets and liabilities:          
Account receivable   (27,730)   9,000 
Prepaid expense and other current assets   (17,031)   (7,239)
Accrued interest    80,338     
Rent deposit   13,953     
Rent payable   2,224     
Unearned revenue   (6,251)   14,063 
Other current liability – related party   18,548    (10,408)
Accounts payable and accrued liabilities   25,252   (17,656)
Net cash used in operating activities   (253,746)   (43,827)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Purchase of property and equipment   (2,105)   (6,880)
Cash acquired from Legend   3,192     
Net cash provided by (used in) investing activities   1,087    (6,880)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Repayment of SBA loan and car loans   (6,175)   (5,696)
Repayment to related parties   (140,289)    
Proceeds from commercial loan   

50,000

     
Advance from related parties   348,075     
Net cash provided by (used in) financing activities   251,611    (5,696)
           
Net decrease in Cash   (1,048)   (56,403)
Cash at beginning of period:   11,734    60,364 
Cash at end of period:  $10,686   $3,961 
           
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFOR          
Interest paid  $209,289   $ 
Income taxes paid  $   $2,172 
           
NONCASH TRANSACTION OF INVESTING ACTIVITIES          
Shares issued for acquisition of Legend  $1,377,000   $- 
Net loan carried through purchase of vehicle with trade-in  $   $36,029 
Additional real estate investment paid through commercial loans  $448,000   $ 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

4
 

 

FORGE INNOVATION DEVELOPMENT CORP. AND SUBSIDIARY

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)

 

                         
  

Number of

Shares

  

Common

Shares

  

Additional

Paid-in

Capital

  

Accumulated

Deficit

  

 

Noncontrolling interests

  

Total

Equity

 

Balance, June 30, 2023

(unaudited)

   50,389,011   $5,039   $4,806,201   $(1,329,119)  $1,169,067   $4,651,188 
Net loss   -    -    -    (583,725)   (81,880)   (665,605)
Balance, September 30, 2023 (unaudited)   50,389,011   $5,039   $4,806,201   $(1,912,844)  $1,087,187   $3,985,583 

 

  

Number of

Shares

  

Common

Shares

  

Additional

Paid-in

Capital

  

Accumulated

Deficit

  

 

Noncontrolling interests

  

Total

Equity

 
Balance, December 31, 2022   45,621,868   $4,562   $1,469,678   $(1,565,579)  $-   $(91,339)
Net loss   -    -    -    (347,265)   (235,813)   (583,078)
Shares issued for compensation   2,800,000    280    1,959,720    -    -    1,960,000 
Acquisition of Legend   1,967,143    197    1,376,803    -    1,323,000    2,700,000 
Balance, September 30, 2023 (unaudited)   50,389,011   $5,039   $4,806,201   $(1,912,844)  $1,087,187   $3,985,583 

 

                     
   Number of Shares   Common Shares  

Additional

Paid-in

Capital

   Accumulated Deficit  

Total

Equity

 
Balance, June 30, 2022 (unaudited)   45,621,868   $4,562   $1,469,678   $(1,571,564)- $(97,324)
Net income   -    -    -    3,639 -  3,639 
Balance, September 30, 2022 (unaudited)   45,621,868   $4,562   $1,469,678   $(1,567,925)- $(93,685)

 

   Number of Shares   Common Shares  

Additional

Paid-in

Capital

   Accumulated Deficit  

Total

Equity

 
Balance, December 31, 2021   45,621,868   $4,562   $1,469,678   $(1,531,467)- $(57,227)
Net loss   -    -    -    (36,458)-  (36,458)
Balance, September 30, 2022 (unaudited)   45,621,868   $4,562   $1,469,678   $(1,567,925)- $(93,685)

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

5
 

 

Forge Innovation Development Corp. and Subsidiary

 

Notes to the consolidated financial statements

 

Note 1 - Organization and Description of Business

 

Forge Innovation Development Corp. (individually “Forge” and collectively with its subsidiary, the “Company”), was initially incorporated in the State of Nevada on January 15, 2016 under the name of You-Go Enterprises, LLC (the “Company Predecessor”). On November 3, 2016, Forge amended its Articles of Incorporation in the State of Nevada to change the Company Predecessor’s name to Forge Innovation Development Corp. Our current principle executive office is located at 6280 Mission Blvd Unit 205, Jurupa Valley, CA 92509. The Company’s main business focuses on real estate development, land purchasing and selling and property management. The Company’s common stock is currently traded on OTCQB under the symbol “FGNV”.

 

On August 17, 2020, the Company established a wholly owned subsidiary, Forge Network Inc, in the State of California. As of September 30, 2023, we have not generated any income from the subsidiary due to our business strategy adjustment.

 

On March 24, 2023, pursuant to an Asset Purchase Agreement between Forge Innovation Development Corp. (the “Company” or the “Buyer”) and Legend Investment Management, LLC (“Legend LLC” or the “Seller”), the Company acquired 77.3% of Legend LLC’s 66% ownership of Legend International Investment, LP (“Legend LP”). Legend LP owns 100% of Mission Marketplace; a grocery anchored shopping center (the “Property”) located at 6240 Mission Boulevard in Jurupa Valley, California. The Property contains two, one-story and one, two-story buildings containing 48,722 total square foot of gross leasable area situated on a 4.51acre site.

 

A relative of the President of the Company has significant influence of the Seller’s management, therefore the acquisition is being treated as a related party transaction. The Company acquired 51% interest of Legend LP from Legend LLC in exchanged for 1,967,143 common stocks of the Company, valued at $0.70 per share for a total purchase price of $1,377,000, which equals 51% of Legend LP’s approximate net value of $2,700,000 based on (1) the Property’s valuation appraisal report dated on February 20, 2023, (2) Legend LP’s net book value as of February 28, 2023, and (3) the loan agreement to Legend LP by a third-party lender effective on March 23, 2023. After the closing of the acquisition, the Company will own 51% of Legend LP and the Seller will own 15% of Legend LP.

 

Note 2 - Summary of Significant Accounting Policies

 

The accompanying unaudited consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.

 

6
 

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. In the opinion of management, all adjustments necessary in order to make the consolidated financial statements not misleading have been included. Actual results could differ from those estimates.

 

Revenue Recognition

 

On January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers, using the modified retrospective approach, which applies the new standard to contracts that are not completed as of the date of adoption. Under the new standard, revenue is recognized upon transfer of control of promised goods and services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those goods and services.

 

Revenue streams that are scoped into ASU 2014-09 include:

 

Property management services: The Company deals directly with prospects and tenants for the owners of properties, which mainly includes marketing property, collecting rent, handling maintenance, repairing issues and responding to tenant complaints. The Company recognizes revenue as earned on a monthly basis and has concluded this is appropriate under the new standard.

 

Real estate sales: The Company accounts for the sale of real estate assets and any related gain recognition in accordance with the accounting guidance applicable to sales of real estate, which establishes standards for recognition of profit on all real estate sales transactions, other than retail land sales. The Company recognizes the sale, and associated gain or loss from the disposition, provided that the earnings process is complete, and the Company does not have significant continuing involvement. Subsequent to the adoption of the new standard, the Company may recognize a gain on a real estate disposition that previously did not qualify as a sale or for full profit recognition due to the timing of the transfer of control.

 

Business Combination

 

We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair values of these identifiable assets and liabilities over the fair value of purchase consideration is recorded as gain on bargain purchase included in other income on the consolidated statement of operations.

 

Non-controlling Interests

 

Non-controlling interests are portions of entities included in the consolidated financial statements that are not attributable to the Company. Non-controlling interests are identified separately from the Company’s stockholders’ equity and its net income (loss). Non-controlling interest equity balances include the non-controlling entity’s initial contribution at the date of the original acquisition, on-going contributions, distributions, and percentage share of earnings since inception. The non-controlling interests are calculated based on percentages of ownership.

 

Share-based compensation

 

The Company accounts for stock options and other equity-based compensation issued in accordance with ASC 718 “Stock Compensation”, which requires the measurement and recognition of compensation expense related to the fair value of equity-based compensation awards that are ultimately expected to vest. Stock-based compensation expense recognized includes the compensation cost for all share-based compensation payments granted to employees and nonemployees, net of estimated forfeitures, over the employees’ requisite service period or the non-employee performance period based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported.

 

7
 

 

New Accounting Standards Adopted

 

In June 2016, the FASB issued ASU No. 2016-13, (Topic 326), Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments which amends the current accounting guidance and requires the use of the new forward-looking “expected loss” model, which requires all expected losses to be determined based on historical experience, current conditions and reasonable and supportable forecasts, rather than the “incurred loss” model. This guidance amends the accounting for credit losses for most financial assets and certain other instruments including trade and other receivables, held-to-maturity debt securities, loans and other instruments. The Company adopted ASU No. 2016-13 on January 1, 2023, which had no impact on the beginning balance of the Company’s balance as there was no receivable balances as of January 1, 2023.

 

The management does not believe that other than disclosed above, the recently issued but not yet adopted accounting pronouncements will have a material impact on its financial position results of operations or cash flows.

 

Note 3 - Going Concern

 

The accompanying consolidated financial statements were prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of obligations in the normal course of business. However, the Company has suffered recurring losses from operations since inception except the first quarter of 2023, resulting in an accumulated deficit of $1,912,844 as of September 30, 2023. These conditions raise substantial doubt about the ability of the Company to continue as a going concern.

 

In view of these matters, continuation as a going concern is dependent upon several factors, including the availability of debt or equity funding upon terms and conditions acceptable to the Company and ultimately achieving profitable operations. Management believes that the Company’s business plan provides it with an opportunity to continue as a going concern. However, management cannot provide assurance that the Company will meet its objectives and be able to continue in operation.

 

The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of Forge Innovation Development Corp. to continue as a going concern.

 

Note 4 – Real Estate Investments

 

On March 24, 2023, the Company acquired 51% of partnership interest of Legend LP from Legend LLC, for issuance of 1,967,143 common stocks of the Company, with a total fair value of $1,377,000. Legend LP owns 100% of Mission Marketplace – a real estate property: a grocery anchored shopping center located at 6240 Mission Boulevard in Jurupa Valley, California. The Property contains two, one-story and one, two-story buildings containing 48,722 total square foot of gross leasable area situated on a 4.51acre site. See Note 8 for the business acquisition.

Schedule of Real Estate Investments 

           
   September 30,2022    
  

(Unaudited)

   December 31,2022 
Commercial building  $7,026,233   $- 
Tenant improvements   736,000    - 
Construction in progress   676,000    - 
Land   527,000    - 
Total real estate investments, at cost   8,965,233    - 
Less: accumulated depreciation   (802,712)   - 
Total real estate investments, net  $8,162,521   $- 

 

Note 5 - Income Taxes

 

The Company has not recognized an income tax benefit for its operating losses generated based on uncertainties concerning its ability to generate taxable income in future periods. The tax benefit for the period presented is offset by a valuation allowance established against deferred tax assets arising from the net operating losses, the realization of which could not be considered more likely than not. In future periods, tax benefits and related deferred tax assets will be recognized when management considers realization of such amounts to be more likely than not.

 

For the three months ended September 30, 2023 and 2022, the Company has incurred a net loss of $665,605 and a net income of $3,639, respectively. For the nine months ended September 30, 2023 and 2022, the Company incurred net loss of $583,078 and $36,458, respectively. Net operation losses (“NOLs”) can be carried forever based on the 2017 Tax Cuts and Jobs Act. As of September 30, 2023 and December 31, 2022, deferred tax assets resulted from NOLs of approximately $666,061 and $420,873, respectively, which were fully off-set by valuation allowance reserved.

 

8
 

 

Note 6 - Related Party Transactions

 

As of September 30, 2023 and December 31, 2022, the amounts due to related parties consisted of the following:

 

      September 30   December 31, 
Party  Nature of relationship    2023     2022 
Patrick Liang (“Patrick”)  Chief Executive Officer  $2,399   $- 
Hua Guo  Officer   38,000    - 
Xiaohui Deng  Member of Legend LP   50,000    - 
Xingyu Liu  Member of Legend LP   100,000    - 
Glory Investment International Inc. (“Glory”)  Entity controlled by Mother of CEO   161,500    - 
Prime Investment International Inc. (“Prime”)  Entity controlled by Mother of CEO   335,435    - 
University Campus Hotel LP (“University”)  Entity controlled by Mother of CEO   191,000    - 
Speedlight Consulting (“Speedlight”)  Entity controlled by a former director, appointed on November 2020 and resigned on January 11, 2023   66,000    60,000 
Amounts due to related parties     $944,334   $60,000 

 

The amounts due to related parties are unsecured, non-interest-bearing and due on demand. During the nine months ended September 30, 2023 and 2022, these related parties paid expenses on behalf of the Company in the total amount of $12,515 and $4,809, respectively. Advances received from these related parties totaled $348,075 during the nine-month period in 2023, and the Company repaid a total of $140,289. $658,000 due to the three entities controlled by Mother of CEO, was assumed by acquisition of Legend LP on March 24, 2023.

 

During the nine months ended September 30, 2023 and 2022, the Company paid compensation to CEO in the amount of $10,000 and $nil, respectively. As of September 30, 2023, $33 has not been paid and was included in the amount due to related parties on the consolidated balance sheet. For the nine months ended September 30, 2023 and 2022, the Company paid professional fee of $56,400 and $29,400, respectively. The amount due to Speedlight represents the professional fee which has not been paid as of September 30, 2023 and December 31, 2022.

 

On January 4, 2021, the Company purchased a vehicle from Patrick Liang, the President of the Company, for daily business operation, in the amount of $22,861, which equaled to the remaining vehicle loan balance with 7.11% interest rate annum for a period of 41 months and monthly installment of $558.

 

On July 15, 2022, the Company traded its Mazda vehicle with Longo Toyota to exchange a 2022 Toyota Mirai. The total purchase price for the 2022 Toyota Mirai is $84,406.12 and the loan amount is $48,295 by deducting the value of the trade-in Mazda vehicle and the rebate from the manufacturer. The monthly installment amount is $671 with 0% APR and a payment term of 72 months. Along with the transaction, we received a $15,000 Hydrogen subsidy card for the compensation for the purchase of new energy automobile. We recorded the subsidy as prepaid expense and unearned revenue to amortize on a straight-line basis over the estimate useful life of four years started on the purchase date. As a result of the trade-in transaction, $6,874 gain on disposal was recognized for the nine months ended September 30, 2022. During the nine months ended September 30, 2023, the Company made loan payment of $6,036.

 

During the nine months ended September 30, 2023 and 2022, the Company generated property management income of $45,000 and $77,000 from Legend. Pursuant to the agreement between Legend and the Company, the Company will manage the properties owned by Legend LP, which is called Mission Marketplace; a grocery anchored shopping center (the “Property”) located at 6240 Mission Boulevard in Jurupa Valley, California. The Property contains two, one-story and one, two-story buildings containing 48,722 total square foot of gross leasable area situated on a 4.51 acre site. The original monthly service charge was $5,000 which was amended to $10,000 per month in June 2022 due to Legend required additional management services for their properties. On November 17, 2022, the monthly service charge was amended to $15,000 with one year term due to new tenants moving in and additional management services desired. On March 24, 2023, the Company acquired 51% interest in Legend LP from Legend LLC. Legend LP became a subsidiary of the Company.

 

Note 7 – Commercial and SBA Loans

 

On July 14, 2020, the Company entered into a loan agreement with the U.S. Small Business Administration (“SBA”), pursuant to which the Company obtained a loan in the amount of $14,000 with the term of 30 years and interest rate of 3.75%, payable monthly including principal and interest in the amount $69. As of September 30, 2023 and December 31, 2022, the outstanding loan balances were $12,551 and $12,689, respectively.

 

9
 

 

Upon acquisition of Legend LP, the Company assumed loan from Legend LP which is payable to a third party (the “Lender”) in the principal amount of $3,531,200 (the “Existing Loan”). On March 23, 2023, Legend LP extended the Existing Loan with the Lender in a promissory note (the “Note”) at the interest rate of 3.73% per annum over “The Wall Street Journal Prime Rate,” as the rate may change from time to time. “The Wall Street Journal Prime Rate” is and shall mean the variable rate of interest, on a per annum basis, which is announced and/or published in the Money Rates section of The Wall Street Journal from time to time as its prime rate. The Note rate shall be redetermined whenever The Wall Street Journal Prime Rate Changes. The Note was formally signed and completed between Legend LP and the lender on April 5, 2023. Pursuant to the Note, the loan is due March 20, 2025. During the nine months ended September 30, 2023, the Company received an additional amount of $448,000 from this Lender which was paid directly to vendors for real estate investments. Accrued interest of $80,338 for the Note and prepayments of $10,412 made on behalf of the Company were included in the commercial loan balance as of September 30, 2023. During the nine months ended September 30, 2023, the Company recognized interest expense and loan fee of $333,283, with $209,289 paid in cash. As of September 30, 2023, interest payable of $43,656 was presented and included in the accounts payable and accrued liabilities on the consolidated balance sheet.

 

The Company also assumed a loan from a third party in the total amount of $386,091 upon acquisition of Legend LP, which is unsecured, non-interest-bearing and due one demand.

 

Note 8 – Acquisition of Legend

 

On March 23, 2023, the Company acquired 51% of partnership interest of Legend LP from Legend LLC, for issuance of 1,967,143 common stocks of the Company, with a total fair value of $1,377,000. Legend became a subsidiary of the Company. Legend LP owns 100% of Mission Marketplace: a grocery anchored shopping center located at 6240 Mission Boulevard in Jurupa Valley, California. The Property contains two, one-story and one, two-story buildings containing 48,722 total square foot of gross leasable area situated on a 4.51acre site. Legend LLC is a related party of the President of the Company. The acquisition has been accounted for as a business combination in accordance with ASC 805 Business Combinations.

 

The following table presents the allocation of the consideration transferred to the assets acquired and liabilities assumed based on their fair values.

 

   Allocation 
Total purchase consideration  $1,377,000 
Fair value of non-controlling interests   1,323,000 
Total consideration   2,700,000 
      
Identifiable net assets acquired:     
Cash  $3,192 
Account receivable   81,779 
Prepaid expenses and other   49,959 
Real estate investments   7,888,323 
Accounts payable and accrued liabilities   (104,256)
Security deposits payable   (121,893)
Unearned revenue   (34,125)
Loans to related parties   (658,000)
Loans, current   (3,917,291)
Net assets acquired   3,187,688 
Gain on bargain purchase  $(487,688)

 

Given the nature of Legend’s operations, substantially all revenue and expenses incurred at the beginning of the month. Considering the short period of 7 days from acquisition date to the quarter end, upon agreement with Legend LLC, the Company would start to consolidate the operation results of Legend from April 1, 2023. From April 1, 2023 to September 30 2023, the Company recognized net loss of $269,213 net of noncontrolling interest from operations of Legend LP.

 

10
 

 

Note 9 – Stockholders’ Equity

 

As of September 30, 2023 and December 31, 2022, the Company had 50,389,011 and 45,621,868 shares of common stock issued and outstanding, respectively.

 

On March 24, 2023, the Company issued 1,967,143 shares of common stock to complete the acquisition of Legend (Note 8).

 

2023 Equity Incentive Plan

 

On June 15, 2023, the Board of the Company adopted an equity incentive plan to increase stockholder value and to advance the interests of the Company by furnishing a variety of economic incentives (“Incentives”) designed to attract, retain and motivate employees, certain key consultants and directors of the Company. Incentives may consist of opportunities to purchase or receive shares of Common Stock, $0.0001 par value, of the Company (“Common Stock”) on terms determined under this plan (the “2023 Equity Incentive Plan”). Under the 2023 Equity Incentive Plan, the Company can issue up to 5,000,000 shares of common stocks of the Company. Incentives may be granted in any one or a combination of: (a) incentive stock options and non-statutory stock options; (b) stock appreciation rights; (c) stock awards; (d) restricted stock; and (e) performance shares. Such incentives may be subject to vesting conditions determined by the Board of Directors at grant. The maximum term of options or other stock-based award granted is ten years or such lesser time as determined by the Board of Directors at the time of grant.

 

On June 26, 2023, the Company granted a total of 2,800,000 shares of common stock of the Company to four consultants for one-year consulting services, pursuant to the Company’s 2023 Equity Incentive Plan. The fair value of the shares granted was valued in the amount of $1,960,000 at the grant date. For the nine months ended September 30, 2023, the Company recognized share-based compensation in the amount of $536,986. As of September 30, 2023, the deferred share-based compensation totaled $1,423,014.

 

As of September 30, 2023, the Company’s common stock issuable under the 2023 Equity Incentive Plan totaled 2,200,000 shares.

 

Note 10 - Commitment and Contingencies

 

On December 8, 2017, the Company entered into a lease agreement with Puente Hills Business Center II, L.P. (“PHBC-II”) for a lease term of forty-eight months, and which was scheduled to expire on January 14, 2022, at monthly rent of $4,962, subject to increase. On or about September 29, 2020, the Company vacated the premises. On October 22, 2020, PHBC-II filed a lawsuit against the Company and its guarantor, Mr. Liang. The Company has retained legal counsel to address the matter and the Court has rescheduled the trial date from January 31, 2023 to April 18, 2023, and then again rescheduled to June 14, 2023. On July 14, 2023, the Company reached a settlement with PHBC-II and agreed to pay rent of $100,000 and rent deposit of $13,953 became nonrefundable. During the three and nine months ended September 30, 2023, the Company recognized settlement loss of $30,883 which is included in other income (expense), net on the consolidated statement of operations. As of September 30, 2023, the Company had $85,294 in rent payable to PHBC-II, with $45,294 within one year and $40,000 due after one year. As of December 31, 2022, the Company had rent payable in the amount of $83,070.

 

Note 11- Subsequent Event

 

The Company has evaluated all other subsequent events through the date these condensed financial statements were issued and determine that there were no other subsequent events or transactions that require recognition or disclosures in the condensed financial statements.

 

11
 

 

Item 2. Management’s Discussion and Analysis and Plan of Operation

 

This 10−Q contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with the consolidated financial statements and accompanying notes and the other financial information appearing elsewhere in this report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events.

 

Overview

 

Forge Innovation Development Corp. is a development stage company and was incorporated in the State of Nevada in January 2016. The Company’s primary objective is commercial and residential land development, including the purchase and sale of real estate, targeting properties primarily in Southern California. We also intend to manage properties we own, and properties owned by unaffiliated third parties. Our activities will include securing acquisition rights to properties, obtaining zoning and other entitlements for the properties, securing financing for purchase of the properties, improving the properties’ infrastructure and amenities and selling the properties to homeowner and commercial owners for restaurants, offices and small businesses. Our first property acquisition was 29 acres in the city of Desert Hot Springs in Southern California. Due to problems with permits and adjacent landowners, rather than getting involved in protracted negotiations, the Company sold the property to an independent third party for a profit.

 

On August 17, 2020, the Company established a wholly owned subsidiary, Forge Network Inc, in the State of California. As of June 30, 2023, we have not generated any income from the subsidiary due to our business strategy adjustment.

 

On March 24, 2023, pursuant to an Asset Purchase Agreement between Forge Innovation Development Corp. (the “Company” or the “Buyer”) and Legend Investment Management, LLC (“Legend LLC” or the “Seller”), the Company acquired 77.3% of Legend LLC’s 66% ownership of Legend International Investment, LP (“Legend LP”). Legend LP owns 100% of Mission Marketplace; a grocery anchored shopping center (the “Property”) located at 6240 Mission Boulevard in Jurupa Valley, California. The Property contains two, one-story and one, two-story buildings containing 48,722 total square foot of gross leasable area situated on a 4.51acre site.

 

A relative of the President of the Company has significant influence of the Seller’s management, therefore the acquisition is being treated as a related party transaction. The Company acquired 51% interest of Legend LP from Legend LLC in exchanged for 1,967,143 common stocks of the Company, valued at $0.70 per share for a total purchase price of $1,377,000, which equals 51% of Legend LP’s approximate net value of $2,700,000 based on (1) the Property’s valuation appraisal report dated on February 20, 2023, (2) Legend LP’s net book value as of February 28, 2023, and (3) the loan agreement to Legend LP by a third-party lender effective on March 23, 2023. After the closing of the acquisition, the Company will own 51% of Legend LP and the Seller will own 15% of Legend LP.

 

Results of operation for the three months ended September 30, 2023

 

For the three months ended September 30, 2023, we had total revenue of $132,760, as compared to $37,000 for the three months ended September 30, 2022, an increase of $95,760 or 259%. The increase was mainly due to the acquisition of Legend LP in the first quarter of 2023 which generated rent income for the three months ended September 30, 2023.

 

For the three months ended September 30, 2023, we had property management income from related party, Legend LP, in the amount of $nil, as compared to $37,000 for the three months ended September 30, 2022, a decrease of $37,000. The decrease was mainly due to the acquisition of Legend LP, which eliminated to recognize property management income from Legend LP as intercompany transaction for the three months ended September 30, 2023.

 

12
 

 

For the three months ended September 30, 2023, the Company had total rent income generated by Legend LP of $132,760 as compared to $nil during the three months ended September 30, 2022, an increase of $132,760, or 100%. The increase was mainly resulted from the acquisition of Legend LP.

 

During the three months ended September 30, 2023 and 2022, the Company incurred general and administrative expenses of $50,499 and $26,629, respectively. During the same period of 2022 and 2023, the depreciation expense increased from $3,372 to $68,884, and property operating expense increased from $nil to $40,354. The increases in expenses are mainly due to the acquisition of Legend LP, which leads more depreciation expenses and property operating related expenses.

 

During the three months ended September 30, 2023 and 2022, the Company had interest expense of $128,520 and $nil occurred from the loans of Legend LP, respectively.

 

For the three months ended September 30, 2023 and 2022, the Company had share-based compensation of $494,027 and $nil. The increase is due to the adoption of 2023 Equity Incentive Plan and the issuance of 2,800,000 shares of common stocks under the plan to the Company’s 2023 Equity Incentive Plan.

 

Results of operation for the nine months ended September 30, 2023

 

For the nine months ended September 30, 2023, we had total revenue of $310,770, as compared to $82,863 for the nine months ended September 30, 2022, an increase of $227,907 or 275%. The increase was mainly due to the acquisition of Legend LP in the first quarter of 2023.

 

For the nine months ended September 30, 2023, we had property management income of $45,000, as compared to $82,863 for the nine months ended September 30, 2022, a decrease of $37,863. The decrease was mainly due to the acquisition of Legend LP, which eliminated to recognize property management income from Legend LP as intercompany transaction for the three months ended September 30, 2023.

 

For the nine months ended September 30, 2023, the Company had total rent income generated by Legend LP of $265,770 as compared to $nil during the nine months ended September 30, 2022, an increase of $265,770, or 100%. The increase was mainly resulted from the acquisition of Legend LP.

 

During the nine months ended September 30, 2023 and 2022, the Company incurred general and administrative expenses of $148,890 and $87,100 respectively. During the same period of 2022 and 2023, the depreciation expense increased from $11,745 to $190,731, and property operating expense increased from $nil to $92,364. The increases in expenses are mainly due to the acquisition of Legend LP, which leads more depreciation expenses and property operating related expenses.

 

During the nine months ended September 30, 2023 and 2022, the Company had interest expense of $333,283 and $nil occurred from the loans of Legend LP.

 

During the nine months ended September 30, 2023 and 2022, the Company had gain on bargain purchase of $487,688 and $nil on the acquisition of Legend LP.

 

For the nine months ended September 30, 2023 and 2022, the Company had share-based compensation of $536,896 and $nil. The increase is due to the adoption of 2023 Equity Incentive Plan and the issuance of 2,800,000 shares of common stocks under the plan to the Company’s 2023 Equity Incentive Plan.

 

Equity and Capital Resources

 

We have incurred losses since inception of our business in 2016, except for the first quarter of 2023, and as of September 30, 2023, we had an accumulated deficit of $1,912,844. As of September 30, 2023, we had cash of $10,686 and a working capital of $78,160, compared to cash of $11,734 and a negative working capital of $140,204 as of December 31, 2022. The change in the working capital was primarily due to cash used to pay for operating expenses, deferred compensation and acquired loans from Legend.

 

13
 

 

Going Concern Assessment

 

The Company demonstrates adverse conditions that raise substantial doubt about the Company’s ability to continue as a going concern. These adverse conditions are negative financial trends, specifically cash outflow from operating activities, operating losses, accumulated deficit and other adverse key financial ratios.

 

Management’s plan to alleviate the substantial doubt about the Company’s ability to continue as a going concern include attempting to improve its business profitability, its ability to generate sufficient cash flow from its operations and execute the business plan of the Company in order to meet its operating needs on a timely basis. However, there can be no assurance that these plans and arrangements will be sufficient to fund the Company’s ongoing capital expenditures and other requirements.

 

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that the Company cannot continue as a going concern.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

 

Critical Accounting Policies

 

The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires making estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

The critical accounting policies are discussed in further detail in the notes to the audited consolidated financial statements appearing elsewhere in this report. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a “small reporting company” we are not required to provide this information under this item pursuant to Regulation S-K.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this report on Form 10-Q, our President (principal executive officer) and our Chief Financial Officer performed an evaluation of the effectiveness of and the operation of our disclosure controls and procedures as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act. Based on that evaluation, our President and Chief Financial Officer each concluded that as of the end of the period covered by this report on Form 10-Q, our disclosure controls and procedures were not effective in timely alerting them to material information relating to Forge Innovation Development Corp. required to be included in our Exchange Act filings.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the quarter ended September 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

On December 8, 2017, the Company entered into a lease agreement with Puente Hills Business Center II, L.P. (“PHBC-II”) for a lease term of forty-eight months, and which was scheduled to expire on January 14, 2022, at monthly rent of $4,962, subject to increase. On or about September 29, 2020, the Company vacated the premises. On October 22, 2020, PHBC-II filed a lawsuit against the Company and its guarantor, Mr. Liang. The Company has retained legal counsel to address the matter and the Court has rescheduled the trial date from January 31, 2023 to April 18, 2023, and then again rescheduled to June 14, 2023. On July 14, 2023, the Company reached to a settlement with PHBC-II and agreed to pay rent of $100,000 and rent deposit of $13,953 became nonrefundable. During the nine months ended September 30, 2023, the Company recognized settlement loss of $30,883 in other income (expense), net on the consolidated statement of operations. As of September 30, 2023 and December 31, 2022, the Company had $85,294 and $83,070 rent payable toward the lease agreement, respectively.

 

Item 1A. Risk Factors.

 

As a “smaller reporting company”, we are not required to provide this information under this item pursuant to Regulation S-K.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

On June 26, 2023, the Company granted total 2,800,000 shares of common stock of the Company to four consultants, pursuant to the Company’s 2023 Equity Incentive Plan, the shares of which were registered with the SEC by filing of the Form S-8 dated on June 16, 2023. The fair value of the shares granted was valued in the amount of $1,960,000 at grant date. For the three and nine months ended September 30, 2023, the Company recognized share-based compensation in the amount of $494,027 and 536,986, respectively. As of September 30, 2023, the deferred share-based compensation totaled $1,423,014.

 

Item 3. Defaults Upon Senior Securities.

 

None

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None

 

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Item 6. Exhibits.

 

(a) Exhibits.

 

Exhibit   Item
     
31.1*   Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
31.2*   Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
32.1*   Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
101.INS   Inline XBRL Instance Document
101.SCH   Inline XBRL Taxonomy Extension Schema Document
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

* Filed herewith.

 

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SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  FORGE INNOVATION DEVELOPMENT CORP.
   
Date: November 14, 2023 /s/ Patrick Liang
  Patrick Liang
  Chief Executive Officer
   
Date: November 14, 2023 /s/ Patrick Liang
  Patrick Liang
  Chief Financial Officer

 

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EXHIBIT INDEX

 

Exhibit   Item
     
31.1*   Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
31.2*   Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
32.1*   Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
101.INS   Inline XBRL Instance Document
101.SCH   Inline XBRL Taxonomy Extension Schema Document
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

* Filed herewith.

 

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