RELT Reliant Holdings Inc (QB)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the fiscal quarter ended June 30, 2024

FOR THE TRANSITION PERIOD FROM _____________ TO _____________

Commission File Number 000-56012

Registrant’s telephone number, including area code: +1 213-437-3081

Securities registered pursuant to Section 12(b) of the Act: None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒      No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

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

State the number of shares of the issuer’s common stock outstanding, as of the latest practicable date: 16,785,000 shares of common stock are issued and outstanding as of August 14, 2024.

TABLE OF CONTENTS

Cautionary Statement Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended and the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this Report. These factors include:

You should read the matters described in “Risk Factors” and the other cautionary statements made in this Report, as being applicable to all related forward-looking statements wherever they appear in this Report. We cannot assure you that the forward-looking statements in this Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.

Reliant Holdings, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

For the six months ended June 30, 2024 and 2023

(Unaudited)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

You should read the matters described in “Risk Factors” and the other cautionary statements made in this Report, and incorporated by reference herein, as being applicable to all related forward-looking statements wherever they appear in this Report. We cannot assure you that the forward-looking statements in this Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.

This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the audited financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on April 18, 2024 (the “Annual Report”).

Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our consolidated financial statements included above under “Part I - Financial Information” – “Item 1. Financial Statements”.

In this Quarterly Report on Form 10-Q, we may rely on and refer to information regarding the industries in which we operate in general from market research reports, analyst reports and other publicly available information. Although we believe that this information is reliable, we cannot guarantee the accuracy and completeness of this information, we have not independently verified any of it, and we have not commissioned any such information.

Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” “Reliant”, “Reliant Holdings” and “Reliant Holdings, Inc.” refer specifically to Reliant Holdings, Inc. and its consolidated subsidiaries.

In addition, unless the context otherwise requires and for the purposes of this Report only:

Where You Can Find Other Information

We file annual, quarterly, and current reports, proxy statements and other information with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC like us at http://www.sec.gov (our filings can be found at https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001682265). Copies of documents filed by us with the SEC are also available from us without charge, upon oral or written request to our Secretary, who can be contacted at the address and telephone number set forth on the cover page of this Report. Our website address is https://www.reliantholdingsinc.com. The information on, or that may be accessed through, our website is not incorporated by reference into this Report and should not be considered a part of this Report.

Summary of The Information Contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:

Overview

Corporate Information

Our principal executive offices are located at 8605 Santa Monica Boulevard, PMB 36522, Los Angeles, CA 90069, and our telephone number is (512) 407-2623.

Summary Description of Business Operations

Residential Pools

We, through our wholly-owned subsidiary Reliant Pools (which has been in operation since September 2013), are an award winning, custom, swimming pool construction company located in the greater Austin, Texas market. We assist customers with the design of, and then construct, recreational pools which blend in with the surroundings, geometric pools which complement the home’s architecture and water features (e.g., waterfalls and negative edge pools) which provide the relaxing sounds of moving water. Moving forward, we may expand our custom pool construction operations locally and regionally, and nationally.

To date, the majority of our growth has been through referral business. We offer a wide variety of pool projects based upon price and the desires of the client. When our sales personnel meet with a prospective customer, we provide them with an array of projects from the basic pool building to more high-end projects that may include waterfalls, mason work, backyard lighting and in-ground spas to highlight the outdoor living experience.

Custom Homes

On October 10, 2018, the Company incorporated a new wholly-owned subsidiary in Texas, Reliant Custom Homes, Inc. and is attempting to expand its operations in the Austin, Texas area as a custom home builder. To date, the Company has engaged a consultant in connection with custom home builder services, and has purchased land located in Lago Vista, Texas, in the Texas Hill Country, outside of Austin, Texas, on which it has started constructing a custom home which it then plans to sell. Current plans are for the custom home to be approximately 2,300 square feet. In April 2020, the Company obtained a construction loan for $221,000 for the construction costs associated with the build, of which $186,404 was outstanding as of December 31, 2022 and $220,309 was outstanding as of December 31, 2023, which funds were used for building materials purchases. The loan has been renewed and has been extended through July 28, 2024. On May 17, 2024, the Company closed on the sale of the custom home for net proceeds of $495,049 after deducting commissions and other fees.

We currently anticipate building custom homes on a build-to-order basis where we do not begin construction of the home until we have a signed contract with a customer. However, we may in the future also build speculative (“spec”) homes, which would allow us to compete with existing homes available in the market, especially for homebuyers that require a home within a short time frame.

We intend on winding down the custom homes business during the 3^rd quarter.

Onar

On July 25, 2024, we acquired HLDCO, LLC and its wholly owned subsidiary, Integrum Group, LLC, which is currently undergoing a name change and rebranding (“ONAR”).  ONAR, a leading marketing agency group, brings extensive expertise and a dynamic business model that will help enhance our market value. ONAR provides a host of services specifically focused on middle-market companies that need the flexibility of both specialized and holistic marketing services. ONAR currently operates three wholly owned and highly specialized marketing agencies: Storia, an artificial intelligence-enabled digital performance marketing agency; VMED, a healthcare marketing agency; and Chalk, an experiential marketing agency.

As a network of marketing agencies, ONAR is structured for strategic mergers and acquisitions. Beyond organic growth, ONAR capitalizes on the rising cost of capital and decreasing multiples for marketing agency owners. Agencies acquired by ONAR can leverage our platform and resources to monetize their business better and lower their expenses. Additionally, by leveraging public equities, we offer sellers/partners the chance to secure future liquidity at higher valuations, backed by our extensive experience, making it attractive for them to join the ONAR family.

ONAR’s agencies currently serve B2B and B2C clients across diverse industries, including consumer products, manufacturing, business services, technology, e-commerce, healthcare, and more. The top productized services offered by ONAR agencies include paid digital advertising, search engine optimization, conversion rate optimization, web development, creative, field marketing, and experiential marketing.

Results of operations for ONAR will be reflected in the third quarter.

Plan of Operations

We had working capital of $137,144 as of June 30, 2024. With our current cash on hand, expected revenues, and based on our current average monthly expenses, we don’t currently anticipate the need for additional funding in order to continue our operations at their current levels and to pay the costs associated with being a public company for the next 12 months. We may, however, require additional funding in the future to expand or complete acquisitions. Our plan for the next twelve months is to continue using the same marketing and management strategies and continue providing a quality product with excellent customer service while also seeking to expand our operations organically or through acquisitions as funding and opportunities arise, and, as discussed above, we have closed on the sale of our custom home. As our business continues to grow, customer feedback will be integral in making small adjustments to improve the product and overall customer experience. We plan to raise additional required funding when required through the sale of debt or equity, which may not be available on favorable terms, if at all, and may, if sold, cause significant dilution to existing stockholders. If we are unable to access additional capital moving forward, it may hurt our ability to grow and to generate future revenues.

Separately, management is exploring, and we may enter into, strategic transactions in the future, as discussed in greater detail below under “Review of Strategic Alternatives”.

Results of Operations

For the Three Months Ended June 30, 2024, compared to the Three Months Ended June 30, 2023

We had revenue of $951,177 for the three months ended June 30, 2024, compared to revenue of $380,289 for the three months ended June 30, 2023, an increase of $570,888 or 150.1% from the prior period. We recognize revenue based on the percentage that a job is complete rather than upon completion for our Pools business. As such, total revenue recognized for each period may be different than the product of total completed pools during each period multiplied by the average pool contract price of each pool during such period, as the construction of certain pools may have started in one period and ended in another. Revenue increased to $411,177 during the current period from $380,289 due to an increase in pools completed in the current period. In addition, we have revenues of $540,000 from the sale of our first custom home which closed in the three months ended June 30, 2024. We had no comparable sales in the same period 2023.

We had cost of goods sold of $721,352 for the three months ended June 30, 2024, compared to cost of goods sold of $210,116 for the three months ended June 30, 2023, an increase of $511,236 or 243.3% from the prior period.

Our cost of goods sold related to our pool business increased by $59,506 during the three months ended June 30, 2024 compared to the three months ended June 30, 2023.  For the six months ended June 30, 2024, we had costs of goods sold related to custom homes of $451,730. We had no cost of goods sold related to custom homes for the six months ended June 30, 2023.

Cost of goods sold of our pool business represents our pool construction costs, including raw materials, outsourced labor, installed equipment, tile and coping expenses, excavation costs and permit expenses. We anticipate our cost of goods sold increasing in approximate proportion to increases in revenue and decreasing in approximate proportion to decreases in revenue, moving forward, as our cost of goods sold are factored into the price we charge for our pools and represent the cost of pool construction, the majority of which is not fixed and varies depending on the total number of pools and construction projects we complete during each period and the size and complexity of such projects.

Cost of goods sold of our home business represents our home construction costs, including land, outsourced labor, building materials, paint and finishings, and related closing costs. We do not expect to incur similar costs in the future as we wind down our home business.

We had a gross margin of $229,825 for the three months ended June 30, 2024, compared to a gross margin of $170,173 for the three months ended June 30, 2023, an increase of $59,652 or 35.1% from the prior period due to the reasons described above. Gross margin as a percentage of revenue was 24.2% and 44.7% for the three months ended June 30, 2024, and 2023, respectively.  Gross margin for our pool business as a percentage of revenue was 34.4% and 44.7% for the three months ended June 30, 2024, and 2023, respectively

We had operating expenses consisting solely of general and administrative expenses of $343,528 for the three months ended June 30, 2024, compared to operating expenses consisting solely of general and administrative expenses of $228,448 for the three months ended June 30, 2023, representing an increase of $115,080 or 50.4%. This increase was related to commission paid upon closing of the custom home.

For both the three months ended June 30, 2024 and June 30, 2023, we had nominal income from interest.

We had interest expense of $3,135 for the three months ended June 30, 2024, compared to interest expense of $3,065 for the three months ended June, 30 2023, due to interest paid in connection with loans for Company vehicles, including a car used by our Chief Executive Officer and amounts outstanding on our construction loan, each as described in greater detail under “Liquidity and Capital Resources” below.

We had net loss of $111,696 for the three months ended June 30, 2024, compared to a net loss of $59,899 for the three months ended June 30, 2023, an increase in net loss of $51,797 mainly due to increased operating expenses derived from custom home sales.

For the Six Months Ended June 30, 2024, compared to the Six Months Ended June 30, 2023

We had revenue of $1,526,935 for the six months ended June 30, 2024, compared to revenue of $1,176,139 for the six months ended June 30, 2023, an increase of $350,796 or 29.8% from the prior period. We recognize revenue of our pools business based on the percentage that a job is complete rather than upon completion. As such, total revenue recognized for each period may be different than the product of total completed pools during each period multiplied by the average pool contract price of each pool during such period, as the construction of certain pools may have started in one period and ended in another. Revenue decreased to 986,935 during the current period compared to $1,176,139 due to a decrease in pools completed in the current period resulting from a downturn in the demand for in ground swimming pools after the increasing interest rates and the increasing costs making pools un-affordable for most residents in the Company’s operating area. In addition, we have revenues of $540,000 from the sale of our first custom home which closed in the six months ended June 30, 2024. We had no comparable sales in the same period 2023.

We had cost of goods sold of $995,628 for the six months ended June 30, 2024, compared to cost of goods sold of $728,972 for the six months ended June 30, 2023, an increase of $266,656 or 36.6% from the prior period.

Although our cost of goods sold related to our pool business actually decreased by $185,074, we had no cost of goods sold related to custom homes for the six months ended June 30, 2023. For the six months ended June 30, 2024, we had costs of goods sold related to custom homes of $451,730.

Cost of goods sold represents our pool construction costs, including raw materials, outsourced labor, installed equipment, tile and coping expenses, excavation costs and permit expenses. We anticipate our cost of goods sold increasing in approximate proportion to increases in revenue and decreasing in approximate proportion to decreases in revenue, moving forward, as our cost of goods sold are factored into the price we charge for our pools and represent the cost of pool construction, the majority of which is not fixed and varies depending on the total number of pools and construction projects we complete during each period and the size and complexity of such projects.

We had a gross margin of $531,307 for the six months ended June 30, 2024, compared to a gross margin of $447,167 for the six months ended June 30, 2023, an increase of $84,140 or 18.8% from the prior period due to the reasons described above. Gross margin as a percentage of revenue was 34.8% and 38.0% for the six months ended June 30, 2024, and 2023, respectively. Gross margin for our pool business as a percentage of revenue was 34.4% and 44.7% for the three months ended June 30, 2024, and 2023, respectively

We had operating expenses consisting solely of general and administrative expenses of $506,406 for the six months ended June 30, 2024, compared to operating expenses consisting solely of general and administrative expenses of $473,901 for the six months ended June 30, 2023. This was a nominal change in our general and administrative expenses.

For both the six months ended June 30, 2024 and June 30, 2023, we had nominal income from interest.

We had interest expense of $11,192 for the six months ended June 30, 2024, compared to interest expense of $3,722 for the six months ended June, 30 2023, due to interest paid in connection with loans for Company vehicles, including a car used by our Chief Executive Officer and amounts outstanding on our construction loan, each as described in greater detail under “Liquidity and Capital Resources” below.

We had net income of $13,605 for the six months ended June 30, 2024, compared to a net loss of $29,930 for the six months ended June 30, 2023, an increase in net income of $43,535 mainly due to increased revenues derived from custom home sales.

Liquidity and Capital Resources

We had total assets of $509,624 as of June 30, 2024, consisting of total current assets of $395,167, which included cash of $394,667 and accounts receivable of $500. We also had net equipment assets of 76,348 and right-of-use asset of 38,109. Equipment relates to the vehicle discussed below.

We had total liabilities of $318,573 as of June 30, 2024, which included current liabilities of $258,023, including accounts payable and accrued liabilities of $47,635, accrued liabilities related parties of $68,138, contract liabilities, relating to billings in excess of costs and estimated earnings on uncompleted jobs of $108,206, current portion of note payable of $7,650, and current portion of right-of-use liability of $26,394, and long-term liabilities consisting of a long-term note payable, net of current portion, of $48,740 relating to certain vehicles (discussed below) and $11,810 of right-of-use liability.

On February 11, 2020, we purchased a Hyundai Genesis G80. The Vehicle had a total purchase price of $50,616, including $11,000 which was paid as a down payment in cash. We entered into a term note, secured by the vehicle, for the remaining amount of the purchase price, which amount accrues interest at the rate of 3.99% per annum and is payable at the rate of $660 per month through maturity on February 27, 2025.

On October 26, 2021, we purchased a Nissan Rogue for use by Mr. May. The vehicle had a total purchase price of $29,931, including $10,000 which was paid as a down payment in cash. We entered into a term note, secured by the vehicle, for the remaining amount of the purchase price, which amount accrues interest at the rate of 6.54% per annum and is payable at the rate of $336 per month through maturity on May 26, 2027.

On April 28, 2020, the Company secured a construction loan from First United Bank and Trust Company to be used to develop the land purchased in the third quarter of 2019. The loan bears interest at the rate of 6.25% per annum and is currently due on April 28, 2024. On May 17, 2024, the Company closed on the sale of the custom home and was able to repay the balance of the construction loan in full along with all interest. As of June 30, 2024, the Company had $0 amounts owed under the construction loan.

We had working capital of $137,144 as of June 30, 2024, compared to working capital of $133,503 as of December 31, 2023.

We had $311,447 of net cash provided by operating activities for the six months ended June 30, 2024, as compared to $278,263 of net cash used in operating activities for the six months ended June 30, 2023. Net cash provided by operating activities for the 2024 period was mainly due to net income of $13,605 and $446,427 from the sale of house and real estate inventory offset by $167,045 in contract liabilities.  For the 2023 period, net cash used in operating activities was mainly due to a loss of 29,930 and $251,423 in contract liabilities mainly offset by $36,000 in stock based compensation and contract assets of $28,900.

We had $226,157 of cash used in financing activities for the six months ended June 30, 2024, which was due $220,309 in repayment of the construct loan and $5,848 from payments on the notes payable.  We had $9,978 of net cash provided by financing activities for the six months ended June 30, 2023, which was due to $29,508 of proceeds from construction loan offset by 6,834 of payments on note payable and $12,696 of payments on right-of-use liability.

We do not currently have any additional commitments or identified sources of additional capital from third parties or from our officers, directors or majority stockholders. Additional financing may not be available on favorable terms, if at all.

In the future, we may be required to seek additional capital by selling additional debt or equity securities, or otherwise be required to bring cash flows in balance when we approach a condition of cash insufficiency. The sale of additional equity or debt securities, if accomplished, may result in dilution to our then stockholders. Financing may not be available in amounts or on terms acceptable to us, or at all. In the event we are unable to raise additional funding and/or obtain revenues sufficient to support our expenses, we may be forced to curtail or abandon our business operations, and any investment in the Company could become worthless.

Review of Strategic Alternatives

The costs and expenses of our public reporting obligations are material, and materially affect our quarterly results of operations and profitability. As a result, the Company has initiated a formal review process to evaluate strategic alternatives for the Company. Mr. Zdanow, as sole officer and director, is committed to acting in the best interests of the Company, its stockholders and its stakeholders.

In the future, we or our majority stockholders (including Claude Zdanow, our sole officer and director and Michael Chavez, a significant shareholder of the Company), may enter into transactions with parties seeking to merge and/or acquire us and/or our operations. While we have not entered into any definitive binding acquisition agreements with any such parties to date, in the event that we do enter into such a definitive binding transaction or transactions in the future, our majority stockholders will likely change and new shares of common stock or preferred stock could be issued resulting in substantial dilution to our then current stockholders. As a result, our new majority stockholders may change the composition of our Board of Directors (currently consisting solely of Mr. May) and replace our current management. Any future transaction may also result in a change in our business focus. We have not entered into any definitive acquisition agreements relating to any strategic transaction involving the Company as of the date of this filing and may not enter into such agreements in the future. Any future strategic transaction involving the Company or its operations may have a material effect on our operations, cash flows, results of operations, prospects, plan of operations, the quotation of our common stock on the OTCQB Market, our officers, directors and majority stockholders, and ultimately the value of our securities.

There is no deadline or definitive timetable set for completion of the strategic alternatives review process and there can be no assurance that this process will result in the Company pursuing a transaction or any other strategic outcome. The Company does not intend to make any further public comment regarding the review of strategic alternatives until it has been completed or the Company determines that a disclosure is required by law or otherwise deemed appropriate.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates, and such differences may be material.

“Note 1. The Company and Summary of Significant Accounting Policies” in Part I, Item 1 of this Form 10-Q and “Note 1. The Company and Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Part II, Item 8, of the 2023 Annual Report, describe the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have established and maintain a system of disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed in our reports filed with the Securities and Exchange Commission pursuant to the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Commission and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), to allow timely decisions regarding required disclosures.

In connection with the preparation of this Quarterly Report on Form 10-Q, our management, with the participation of our Chief Executive Officer (our Principal Executive Officer and Principal Financial Officer), carried out an evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2024, as required by Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on the evaluation described above, our management, including our Principal Executive Officer and Principal Financial Officer, concluded that, as of June 30, 2024, our disclosure controls and procedures were not effective.

Changes in Internal Control Over Financial Reporting

We regularly review our system of internal control over financial reporting to ensure we maintain an effective internal control environment.  There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Material Weakness in Internal Controls Over Financial Reporting

We identified a material weakness in our internal control over financial reporting that exists as of June 30, 2024. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We determined that we had a material weakness because, due to our small size, and our limited number of personnel, we did not have in place an effective internal control environment with formal processes and procedures, to allow for a detailed review of accounting transactions that would identify errors in a timely manner.

Notwithstanding the material weaknesses in our internal control over financial reporting, we have concluded that the consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America.

Part II – Other Information

Item 1. Legal Proceedings

Although we may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business, we are not currently a party to any material legal proceeding. In addition, we are not aware of any material legal or governmental proceedings against us or contemplated to be brought against us. 

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on April 18, 2024, under the heading “Item 1A. Risk Factors”, except as discussed below, and investors should review the risks provided in the Annual Report, and below, prior to making an investment in the Company. The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in the Annual Report, under “Item 1A. Risk Factors”, and below, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.

We may enter into strategic transactions in the future which may result in a material change in our operations and/or a change of control.

The costs and expenses of our public reporting obligations are material, and materially affect our quarterly results of operations and profitability. In the future, we or our majority stockholders (including Claude Zdanow, our sole officer and director and Michael Chavez, a significant shareholder of the Company), may enter into transactions with parties seeking to merge and/or acquire us and/or our operations. While we have not entered into any definitive binding acquisition agreements with any such parties to date, in the event that we do enter into such a definitive binding transaction or transactions in the future, our majority stockholders will likely change and new shares of common stock or preferred stock could be issued resulting in substantial dilution to our then current stockholders. As a result, our new majority stockholders may change the composition of our Board of Directors (currently consisting solely of Mr. May) and replace our current management. Any future transaction may also result in a change in our business focus. We have not entered into any definitive acquisition agreements relating to any strategic transaction involving the Company as of the date of this filing and may not enter into such agreements in the future. Any future strategic transaction involving the Company or its operations may have a material effect on our operations, cash flows, results of operations, prospects, plan of operations, the quotation of our common stock on the OTCQB Market, our officers, directors and majority stockholders, and ultimately the value of our securities.

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

Unregistered Sales of Equity Securities

There have been no sales of unregistered securities during the quarter ended June 30, 2024 and from the period from April 1, 2024 to the filing date of this Report.