This Management's Discussion and Analysis of Financial Condition and Results of
Operations includes a number of forward-looking statements that reflect
Management's current views with respect to future events and financial
performance. You can identify these statements by forward-looking words such as
"may," "will," "expect," "anticipate," "believe," "estimate" and "continue," or
similar words. Those statements include statements regarding the intent, belief
or current expectations of us and members of our management team as well as the
assumptions on which such statements are based. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risk and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking statements.
Readers are urged to carefully review and consider the various disclosures made
by us in this report and in our other reports filed with the Securities and
Exchange Commission. Important factors currently known to Management could cause
actual results to differ materially from those in forward-looking statements. We
undertake no obligation to update or revise forward-looking statements to
reflect changed assumptions, the occurrence of unanticipated events or changes
in the future operating results over time. We believe that our assumptions are
based upon reasonable data derived from and known about our business and
operations. No assurances are made that actual results of operations or the
results of our future activities will not differ materially from our
assumptions. Factors that could cause differences include, but are not limited
to, expected market demand for our products, fluctuations in pricing for
materials, and competition.
General Overview
US Lighting Group, Inc. (the "Company") was originally incorporated in the State
of Florida on October 17, 2003, under the name Luxurious Travel Corp., The
Company acquired all of the issued and outstanding capital stock of US Lighting
Group, Inc. (founded in 2013 in accordance with the laws of the State of
Wyoming) on July 13, 2016, and the corporate name was changed on August 9, 2016,
to the US Lighting Group, Inc. At the time the Company designed and manufactured
commercial LED lighting, both for retrofits and new construction.
Through supplying Original Equipment Manufacturers (OEM's) with electronic
components the Company was introduced to the Recreational Vehicle (RV) Industry.
Management identified a fast growing and underserved niche of small, tow-behind
fully molded fiberglass travel trailers. The Company started developing a new
business plan to create a luxury 17' Travel Camper to appeal to young
professionals working remotely as well as retirees and other consumers intrigued
by the travelling lifestyle.
On May 14, 2021, the Company and Intellitronix Corporation entered into an Asset
Purchase Agreement with Ohio INTX Cooperative, a State of Ohio cooperative
association, to sell selected assets of Intellitronix Corporation. The Asset
Purchase Agreement and related sale was finalized on May 14, 2021. 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.
On January 11, 2021, the Company formed Cortes Campers, LLC ("Cortes Campers"),
a wholly owned subsidiary, to operate its new brand of innovative travel
trailers. During the second part of 2021 the Company heavily invested in
Research and Development as well as production planning for the 17' Camper and
began selling campers in early 2022.
The Company plans to increase camper sales, expand its manufacturing footprint,
enhance production techniques, and develop more products in the RV, marine,
composite housing, and electronics sectors.
The original Futuro house is a round,prefabricated house designed by Finnish
architect Matti Suuronen, of which fewer than 100 were built during the late
1960s and early 1970s. The shape, reminiscent of a flying saucer, and the
structure's airplane hatch entrance has made the houses sought after by
collectors and by Airbnb renters. The Futuro was composed of
fiberglass-reinforced polyester plastic, polyester-polyurethane, and poly(methyl
methacrylate), measuring 4 meters (13 feet) high and 8 meters (26 feet) in
diameter.
On August 5, 2022, the Company entered into a Stock Purchase Agreement with Paul
Spivak, the Company's majority stockholder and former president, acquired one
hundred percent of the outstanding shares of common stock of Mig Marine Corp.
Mig Marine was formed on March 4, 2003, in Ohio to design, develop and
manufacture composite products for the marine and automotive industries.
During 2020 and 2021 the company developed its first model, a 17' travel camper
with all tooling fabricated in house. The company owns the tooling for the
exterior shell, inner liner, and interior components, such as countertops,
cabinets etc.
The innovative design defies construction techniques currently used by the RV
industry. Drawing from its expertise as a boat manufacturer, the Company
replaces all wood with composite alternatives or corrosion resistant materials,
producing a truly durable camper designed to last a lifetime. Other innovations
include axle-less independent suspension, corrosion resistant chassis and
four-season insulation, with further developments in the process.
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The process has been largely developed for the manufacturing method; however,
process modifications might be needed for scaling production to meet the demand.
The company conducts its R&D and manufacturing at one location, outside of
Cleveland, Ohio.
The Mig Marine Corp acquisition has been determined to be a combination of
entities under common control that resulted in a change in the reporting entity.
Accordingly, the financial results of the Company have been recast to include
the financial results of Mig Marine Corp in the current and prior periods as if
Mig Marine Corp had always been consolidated. The assets and liabilities of Mig
Marine Corp 'have been recorded in the Company's consolidated statements of
financial condition at the seller's historical carrying value.
On August 5, 2022, the Company entered into a Stock Purchase Agreement with Paul
Spivak, the Company's majority stockholder and former president, and acquired
one hundred percent of the outstanding shares of common stock of Mig Marine
Corp. Mig Marine was formed on March 4, 2003, in Ohio to design, develop and
manufacture composite products for the marine and automotive industries.
Results of Operations for the Three Months Ended September 30, 2022 Compared to
the Three Months Ended September 30, 2021
Sales
Total sales from continuing operations for the three months ended the September
30, 2022 were $516,000, compared to $21,000 for the three months ended September
30, 2021, an increase of $495,000 or more than 2,000%. 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, whereas
most of September 30, 2021, sales are discontinued and presented as part of
discontinued operations.
Cost of Goods Sold
Cost of goods sold from continuing operations for the three months ended the
September 30, 2022 were $528,000, compared to $0 for the three months ended the
September 30, 2021. The September 30, 2022 cost of goods sold relates to camper
sales from the Company's Cortes Campers subsidiary, whereas most of September
30, 2021 sales are discontinued and presented as part of discontinued
operations.
Operating Expenses
Selling, general and administrative expenses ("SG&A") from continuing
operations were $526,000 for the three months ended the September 30, 2022,
compared to $240,000 for the three months ended the September 30, 2021, an
increase of $286,000. The increase over the prior year can be primarily
attributed to additional administrative staffing, auditing and professional
fees.
Product development costs for the three months ended the June 30, 2022, was
$78,000 compared to $2,000 for the three months ended the September 30, 2021, an
increase of $76,000. The increase is due to the Company changing its focus to
the RV, marine, composite housing, and electronics sectors.
Other Income / Expense
During the three months ended the September 30, 2022, we had total other
expenses of $47,000, including: other expense of $4,000, recognized a realized
gain of $18,000 and an unrealized loss of $32,000 from investments, interest
income of $1,000 related to investments, interest expense of $40,000 and a
$10,000 gain on disposal of fixed assets. During the three months ended the
September 30, 2021, we had total other income of $17,000. We had other income of
$2,000, a gain on extinguishment of debt of $52,000, recognized an unrealized
loss of $9,000 from investments, interest expense of $17,000, related party
interest expense of $19,000 and $7,000 of interest income.
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Net Loss
We had a net loss from continuing operations of $663,000 for the three months
ended September 30, 2022, compared to $204,000 for the three months ended the
September 30, 2021. Our overall net loss from continuing operations increased
mainly due to our increase in SG&A expenses in the current period. For the three
months ended September 30, 2021, we also had a $7,000 net loss from discontinued
operations.
Results of Operations for the Nine Months Ended September 30, 2022 Compared to
the Nine Months Ended September 30, 2021
Sales
Total sales from continuing operations for the nine months ended September 30,
2022 were $641,000, compared to $23,000 for the nine months ended September 30,
2021, an increase of $618,000 or more than 2,000%. 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, whereas
most of September 30, 2021, sales are discontinued and presented as part of
discontinued operations.
Cost of Goods Sold
Cost of goods sold from continuing operations for the nine months ended the
September 30, 2022 were $754,000, compared to $3,000 for the nine months ended
the September 30, 2021. The September 30, 2022 cost of goods sold relates to
camper sales from the Company's Cortes Campers subsidiary, whereas most of June
30, 2021 sales are discontinued and presented as part of discontinued
operations.
Operating Expenses
Selling, general and administrative expenses ("SG&A") from continuing
operations were $1,134,000 for the nine months ended the September 30, 2022,
compared to $859,000 for the nine months ended the September 30, 2021, an
increase of $275,000. The increase over the prior year can be attributed to
increased personnel costs associated with the Company's Cortes Campers
Subsidiary.
Product development costs for the nine months ended the September 30, 2022, were
$123,000 compared to $41,000 for the nine months ended the September 30, 2021,
an increase of $82,000. The increase is due to the Company changing its focus to
the RV, marine, composite housing, and electronics sectors.
Other Income / Expense
During the nine months ended the September 30, 2022, we had total other expense
of $275,000 including: other income of $60,000, recognized a realized loss of
$18,000 and unrealized loss of $288,000 from investments, interest income of
$4,000 related to investments, and interest expense of $56,000. During the nine
months ended September 30, 2021, we had total other income of $174,000. We had
other income, of $3,000, recognized an unrealized gain of $195,000 from
investments, and interest expense, related party of $75,000 and we had $52,000
gain on extinguishment of debt.
Net Loss
We had a net loss from continuing operations of $1,645,000 for the nine months
ended September 30, 2022, compared to $706,000 for the nine months ended the
September 30, 2021. Our overall net loss from continuing operations increased
mainly due to the unrealized loss on our investments in the current period and
the increase to our SG&A expense. For the nine months ended September 30, 2021,
we also had $3,915,000 of income from the sale of discontinued operations and a
$158,000 net loss from discontinued operations.
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Liquidity and Capital Resources
Changes in Cash Flows
Net cash used in operating activities for the nine months ended September 30,
2022, was $1,414,000, as compared to net cash provided by operating activities
of $3,240,000, for the nine months ended the September 30, 2021, which included
$3,915,000 net income from the sale of discontinued operations.
Net cash provided by investing activities was $1,068,000 for the nine months
ended September 30, 2022, compared to net cash used of $3,037,000 for the nine
months ended September 30, 2021. In the prior period we used $3,800,000 to
invest in trading securities and $529,000 to purchase property and equipment.
This was offset with proceeds of $400,000 from the sale of fixed assets and
$892,000 from proceeds from investments. In the current period we received
$35,000 from the sale of fixed assets, $1,341,000 from proceeds from investments
and we used $308,000 to purchase property and equipment.
Net cash used in financing activities for the nine months ended September 30,
2022, was $125,000 and included the repayment of $105,000 of loans payable, and
repayment of $411,000 of notes payable to a related party. Net cash used in
financing activities for the nine months ended September 30, 2021, was $207,000
and included proceeds of $308,000 received from the sale of common stock and
$177,000 from notes payable. Cash received was offset by the repayment of
$161,000 of loans payable, and repayment of $1,077,000 of notes payable to a
related party.
Loans payable for continuing operations consisted of the following as of
September 30, 2022:
September 30,
2022
Secured promissory note 260,000
Vehicle loans 63,000
Convertible Notes 58,000
Total loans payable 381,000
Loans payable, current portion (101,000 )
Loans payable, net of current portion $ 280,000
Critical Accounting Policies and Estimates
Refer to our Form 10-K for the year ended December 31, 2021, for a full
discussion of our critical accounting policies.
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US LIGHTING GROUP, INC. 
