The following discussion and analysis of our consolidated financial condition
and results of operations for years ended December 31,2022, and 2021 should be
read in conjunction with the consolidated financial statements and notes related
thereto included elsewhere in this report and with the unaudited pro forma
condensed combined financial information included in Item 8.
General Overview
US Lighting Group, Inc. is a parent company comprised of four subsidiaries -
Cortes Campers, LLC, a brand of high-end molded fiberglass campers, Futuro
Houses, LLC, focused on design and sales of molded fiberglass homes, Fusion X
Marine, LLC, a high-performance boat designer, and MIGMarine Corporation, a
composite manufacturing company that produces proprietary molded fiberglass
products for our other business lines.
On January 11, 2021, we formed Cortes Campers to operate our new brand of
innovative travel trailers. During the second part of 2021, we invested heavily
in research and development as well as production planning for the 17-foot
camper and began selling campers in early 2022. As of December 31, 2022, our
revenue was driven by shipments of fiberglass campers marketed under Cortes
Campers brand and financial results for 2022 reflect revenue of $1,083,114
generated by Cortes Campers.
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On January 12, 2022, we formed Futuro Houses, LLC to design, marketing and
distribute molded fiberglass homes. Throughout 2022, Futuro Houses engaged in
engineering and development of our first "UFO" themed home model inspired by the
original Futuro house designed by Finnish architect Matti Suuronen. As of
December 31, 2022 , the division had not generated revenue.
We plan to expand our manufacturing footprint, enhance production techniques,
and develop more products in the RV, marine, and composite housing sectors.
Current R&D efforts are directed towards future tow-behind camper models under
Cortes Campers brand as well as prefabricated housing segment.
On August 5, 2022, we acquired Mig Marine from Paul Spivak, our former president
and a significant shareholder. The Mig Marine acquisition has been determined to
be a combination of entities under common control that resulted in a change in
the reporting entity. Accordingly, our financial results have been recast to
include the financial results of Mig Marine in the current and prior periods as
if Mig Marine had always been consolidated with USLG. The assets and liabilities
of Mig Marine have been recorded in our consolidated statements of financial
condition at the seller's historical carrying value.
On May 14, 2021, we sold select assets of Intellitronix Corporation to Ohio INTX
Cooperative, an Ohio cooperative association. In accordance with the provisions
of ASC 205-20, Presentation of Financial Statements, we have separately reported
the assets and liabilities, revenue and expenses related to Intellitronnix as
discontinued operations.
Results of Operations
Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021
Sales
Total sales from continuing operations for the year ended December 31, 2022 were
$1,083,114, compared to $67,000 for the year ended December 31, 2021, an
increase of $1,016,000 or more than 1,500%. The increase in sales is attributed
to new sales through our Cortes Campers subsidiary. During the current period
all sales revenue was from Cortes Campers subsidiary.
Cost of Goods Sold
Cost of goods sold from continuing operations for the year ended the December
31, 2022 were $1,217,196 compared to $0 for the year ended the December 31,
2021. The December 2022 cost of goods sold relates to camper sales from the
Company's Cortes Campers subsidiary.
Operating Expenses
Selling, general and administrative expenses ("SG&A") from continuing operations
were $1,603,565 for the year ended December 31, 2022, compared to $1,109,000 for
the year ended December 31, 2021, an increase of $494,566. The increase over the
prior year can be primarily attributed to additional administrative staffing,
auditing and professional fees relating to our expanded operations.
Product development costs for the year ended the December 31, 2022, was $0
compared to $40,000 for the year ended the December 31, 2021. The decrease is
due to the Company changing its focus to the full production of RV, marine,
composite housing, products rather than on development of these product lines
which was the focus in prior years. Cost related to product development for the
year 2022, were capitalized into work in process and finished goods inventories.
Other Income / Expense
During the year ended December 31, 2022, we had total other expenses of
$374,673, including: unrealized loss of $306,281, interest income of $4,232 and
$23,422 gain on disposal of fixed assets. During the year ended December 31,
2021, we had total other income of $396,000. We had other income of $70,000,
extinguishment of debt of $52,000, an unrealized gain of $52,000, realized gain
from investments of $121,000, interest income of $15,000, interest expense of
$9,000 and related party interest expense of $104,000.
Net Income (Loss)
We had a net loss from continuing operations of $2,112,320 for the year ended
December 31, 2022, compared to $686,000 for the year ended December 31, 2021.
Our net loss from continuing operations decreased in the current year was mainly
due to our other income items as discussed above.
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Liquidity and Capital Resources
Changes in Cash Flows
Net cash provided by operating activities for the year ended December 31, 2022,
was $(1,537,657), compared to $2,983,000, which included net cash from
discontinued operation of $4,002,000, for the year ended December 31, 2021. The
negative in net cash provided by operating activities for the year ended
December 31,2022, was primarily due to the notes payable to related party for
the acquisition of Mig Marine.
Net cash used in investing activities was approximately $816,089 for the year
ended December 31, 2022, compared to $1,034,000 for the year ended December 31,
2021. During the year ended December31, 2022, the Company purchased property and
equipment for $644,630. We also received $120,000 from the sale of fixed assets,
and $1,340,719 of proceeds from the sale of trading securities. Net cash used in
investing activities was approximately $1,034,000 for the year ended December
31, 2021, and relates mostly to investments activities.
Net cash provided by financing activities for the year ended December 31, 2022,
was $557,097 and included proceeds of $140,209 received in the private placement
of common stock, $1,150 from common stock compensations, $629,857 from the
issuance of notes payable related party, $192,918 from the repayment of loans
payable offset by $407,037 of repayment of related party loans. Net cash used by
financing activities for year ended December 31, 2021, was $1,771,000 and
included $301,000 of proceeds from the private placement of common stock, and
$143,000 in proceeds from loans payable. These proceeds were offset by the
repayment of $103,000 of loans payable, and repayment of $2,112,000 of notes
payable to a related party.
We have the following outstanding loan as of December 31, 2022:
On August 5, 2022, the Company acquired MigMarine Corporation ("Mig Marine"),
from the Company's former President and majority shareholder. The Company agreed
to pay $6,833,333 in exchange for all the shares of Mig Marine. A ten percent
(10%) deposit of $638,333 will be payable on or before August 5, 2023. The
balance is represented by a promissory note in the amount of $6,195,000,
sixty-month note matures on August 5, 2027, requires monthly payments of
$120,488, carries an interest rate of 6.25%, and is secured by the assets of Mig
Marine. The loan balance on December 31, 2022, including accrued interest, was
$7,004,629. During the year ended December 31, 2022, the Company accrued
interest of $126,296 and did not make any principal and interest payments,
leaving a balance outstanding of accrued interest only of $126,296 at December
31, 2022.
December 31, December 31,
2022 2021
Equipment loan (a) $ 259,450 $ 260,000
Vehicle loans (b) 59,671 63,000
Working capital (c) 122,135 25,000
Convertible note 0 58,000
Total loans payable 441,256 426,000
Loans payable, current portion (140,905 ) (344,000 )
Loans payable, net of current portion $ 280,000 $ 82,000
a. On August 26, 2020, the Company entered into a loan agreement with Apex
Commercial Capital Corp. in the principal amount of $265,339 with interest at
9.49% per annum and due on September 10, 2030. The loan requires one hundred
nineteen (119) monthly payments of $2,322, with a final balloon payment on the
one hundred twentieth (120) month, or September 10, 2030, of $224,835. The
loan is guaranteed by the Company, the Company's former Chief Executive
Officer, and secured by the Company's real estate. The loan balance on
December 31, 2022, was $259,450. During the year ended December 31, 2022, the
Company made principal payments of $3,084 leaving a total of $259,450 owed at
December 31, 2022.
b. The Company purchases vehicles for employees and research and development
activities. Generally, vehicles are sold or traded in at the end of the
vehicle loan period. The aggregate vehicle loan balance on two vehicles was
$59,671 at December 31, 2022, with an original loan period of 72 to 144
months, and interest rates of zero percent to 10.99%.
c. On November 7, 2022, the Company entered into a $150,000 term loan with Fresh
Funding related to the working capital for the production of campers. The loan
requires monthly payments over the term of 12 months, has an interest rate of
38% per annum, and is secured by the majority shareholder. The loan balance on
December 31, 2022, was $122,135. During the year ended December 31, 2022, the
Company made principal payments of $23,369, and interest payments of $61,497.
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Critical Accounting Policies and Estimates
Management's discussion and analysis of our financial condition and results of
operations are based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires management to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an ongoing basis, management evaluates its estimates, including
those related to impairment of long-lived assets, including finite lived
intangible assets, accrued liabilities, fair value of warrant derivatives and
certain expenses. We base our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ materially from these estimates under different
assumptions or conditions.
Our significant accounting policies are more fully described in Note 2 to our
financial statements. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues, and expenses, and the related
disclosures of contingent assets and liabilities. Actual results could differ
from those estimates under different assumptions or conditions. We believe that
the following critical accounting policies are subject to estimates and
judgments used in the preparation of our consolidated financial statements:
Recent Accounting Pronouncements
See Note 2 of the financial statements for a discussion of recent accounting
pronouncements.
Off-Balance Sheet Arrangements
We do not have any 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 investors.
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