Reliant Holdings Inc

Reliant Holdings, Inc. and Subsidiaries

Notes to the Consolidated****Financial Statements

For the nine months ended September 30, 2024 and 2023

(Unaudited)

Note 1. The Company and Summary of Significant Accounting Policies

The Company

Reliant Holdings, Inc. (the “Company”) was formed as a Nevada corporation on May 19, 2014. On May 23, 2014, Reliant Holdings, Inc., along with Reliant Pools, Inc., formerly Reliant Pools, G.P., which was formed in September 2013 (“Reliant Pools”) and the shareholders of Reliant Pools, entered into an Agreement for the Exchange of common stock whereby Reliant Pools, Inc. became a wholly-owned subsidiary of Reliant Holdings, Inc. Reliant Holdings, Inc. designs, and installs swimming pools.

On July 25, 2024, the Company acquired HLDCO, LLC (“HLDCO”) and its subsidiary Integrum Group LLC (“Integrum”). Integrum was formed in July 2021 as Delaware entity and is currently headquartered Los Angeles, California. The Integrum specializes in marketing solutions through a network of independent agency brands. Its services span various industries, including performance media, medical industry marketing, and experiential marketing. The Integrum focuses on innovation, integrity, collaboration, and excellence, prioritizing the integration of technology, fostering company growth, and creating a collaborative culture among its brands.

On September 12, 2024, Integrum filed a certificate of amendment to its certificate of formation with the Secretary of State of the State of Delaware pursuant to which it changed its corporate name from Integrum Group LLC to Onar, LLC.

Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred losses and has not generated positive cash flows from operations since inception. These matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

The Company’s ability to continue in existence is dependent on its ability to develop additional sources of capital, and/or achieve profitable operations and positive cash flows. Management’s plans with respect to operations include aggressive marketing and raising additional capital through sales of equity or debt securities as may be necessary to pursue its business plans and sustain operations until such time as the Company can achieve profitability. Management believes that aggressive marketing combined additional financing, as necessary, will result in improved operations and cash flows in the future. However, there can be no assurance that management will be successful in obtaining additional funding or in attaining profitable operations. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis of Presentation

The financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

The consolidated financial statements and related disclosures as of September 30, 2024 are unaudited, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations. In our opinion, these unaudited financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair statement of the results for the interim periods. These unaudited financial statements should be read in conjunction with the audited financial statements of the Company for the years ended December 31, 2023 and 2022 included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on April 18, 2024. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the full year ended December 31, 2024.

Use of Estimates

The preparation of financial statements in conformity with U.S. 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 financial statements and the reported amounts of revenues and expenses during the reporting period.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates.

Princi****ples of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Revenue Recognition

The Company accounts for revenue in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codifications (“ASC”) 606, ‘Revenue from Contracts with Customers’ (“ASC 606”).

A performance obligation is a promise in a contract to transfer a distinct good or service to the client and is the unit of accounting in ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation based on the relative standalone selling price. Determining relative standalone selling price and identifying separate performance obligations requires judgment. Contract modifications may occur in the performance of the Company’s contracts. Contracts may be modified to account for changes in the contract specifications, requirements or duration. If a contract modification results in the addition of performance obligations priced at a standalone selling price or if the post-modification services are distinct from the services provided prior to the modification, the modification is accounted for separately. If the modified services are not distinct, they are accounted for as part of the existing contract.

Pool Sale Revenues

Performance Obligations

The Company’s contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct.

Performance Obligations Satisfied Over Time

The majority of The Company’s revenue is derived from construction contracts and projects that typically span between 4 to 12 months. The Company’s construction contracts will continue to be recognized over time because of the continuous transfer of control to the customer as all of the work is performed at the customer’s site and, therefore, the customer controls the asset as it is being constructed. Contract costs include labor, material, and indirect costs.

Performance Obligations Satisfied at a Point in Time

Revenue for The Company’s contracts that do not satisfy the criteria for over time recognition is recognized at a point in time. Substantially all of The Company’s revenue recognized at a point in time is for work performed for pool maintenance or repairs. Unlike The Company’s construction contracts that use a cost-to-cost input measure for performance, the pool maintenance or repairs utilize an output measure for performance based on the completion of a unit of work. The typical time frame for completion of these services is less than one month. Upon fulfillment of the performance obligation, the customer is provided an invoice (or equivalent) demonstrating transfer of control or completion of service to the customer. We believe that point in time recognition remains appropriate for these contracts and will continue to recognize revenues upon completion of the performance obligation and issuance of an invoice.

Contract modifications are routine in the performance of The Company’s contracts. Contracts are often modified to account for changes in the contract specifications or requirements. In most instances, contract modifications are for goods or services that are not distinct, and, therefore, are accounted for as part of the existing contract.

Backlog

On September 30, 2024, we had approximately $426,226 of remaining performance obligations on The Company’s construction contracts, which we also refer to as backlog. We expect to recognize The Company’s backlog as revenue during the next 12 months.

Contract Estimates

Accounting for long-term contracts and programs involves the use of various techniques to estimate total contract revenue and costs. For long-term contracts, we estimate the profit on a contract as the difference between the total estimated revenue and expected costs to complete a contract and recognize that profit over the life of the contract.

Contract estimates are based on various assumptions to project the outcome of future events. These assumptions include labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials, and the performance of subcontractors.

Variable Consideration

Transaction price for The Company’s contracts may include variable consideration, which includes increases to transaction price for approved and unapproved change orders, claims and incentives, and reductions to transaction price for liquidated damages. Change orders, claims and incentives are generally not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as a modification of the existing contract and performance obligation. We estimate variable consideration for a performance obligation at the most likely amount to which we expect to be entitled (or the most likely amount we expect to incur in the case of liquidated damages), utilizing estimation methods that best predict the amount of consideration to which we will be entitled (or will be incurred in the case of liquidated damages). We include variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based largely on an assessment of The Company’s anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. The effect of variable consideration on the transaction price of a performance obligation is recognized as an adjustment to revenue on a cumulative catch-up basis. To the extent unapproved change orders and claims reflected in transaction price (or excluded from transaction price in the case of liquidated damages) are not resolved in The Company’s favor, or to the extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue. No adjustments on any one contract was material to The Company’s consolidated financial statements for the nine months ended September 30, 2024 and 2023.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts (contract assets) on the consolidated balance sheet. On The Company’s construction contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., biweekly or monthly) or upon achievement of contractual milestones. Generally, billing occurs prior to revenue recognition, resulting in contract liabilities. These assets and liabilities are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period.

Advertising Management Services

The Company enters into Master Services Agreement (“MSA”) and Scope of Work (“SOW”) which govern the terms of the Company’s performance obligation for purposes of revenue recognition.

The Company’s performance obligation is a single performance obligation, Advertising Management Services which encompasses the following integrated and interdependent services:

These services are integrated and interdependent, all contributing to the goal of improving the Client's business performance, revenue, and awareness over time. Revenue is recognized over time as the services are provided and the performance obligation is satisfied, consistent with the ongoing optimization efforts. Amounts recognized but not yet invoiced to the customer are included as ‘contract assets’ within the accompanying consolidated balance sheets.

A monthly retainer is charged for ongoing services. Any additional services outside the agreed-upon scope, such as the inclusion of additional services, are subject to prior written approval and will result in additional fees. Retainers received for future services are classified as ‘deferred revenue’ within the accompanying consolidated balance sheets.

Accounts Receivable and Allowances

The Company does not charge interest to its customers and carries its customers’ receivables at their face amounts, less an allowance for doubtful accounts. Included in accounts receivable are balances billed to customers pursuant to retainage provisions in certain contracts that are due upon completion of the contract and acceptance by the customer, or earlier as provided by the contract. Based on the Company’s experience in recent years, the majority of customer balances at each balance sheet date are collected within twelve months. As is common practice in the industry, the Company classifies all accounts receivable, including retainage, as current assets. The contracting cycle for certain long-term contracts may extend beyond one year, and accordingly, collection of retainage on those contracts may extend beyond one year.

The Company grants trade credit, on a non-collateralized basis (with the exception of lien rights against the property in certain cases), to its customers and is subject to potential credit risk related to changes in business and overall economic activity. The Company analyzes specific accounts receivable balances, historical bad debts, customer credit-worthiness, current economic trends, future expected losses, and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In the event that a customer balance is deemed to be uncollectible, the account balance is written-off against the allowance for doubtful accounts. During the periods ended September 30, 2024 and 2023, the Company recorded bad debt expenses totaling $411,714 and $-0-, respectively. As of September 30, 2024 and December 31, 2023, the Company’s allowance for doubtful accounts was $922,358 and $-0-, respectively, all of which was attributable to affiliated entities (Note 5).

Classification of Construction Contract-related Assets and Liabilities

Contract assets are presented as a current asset in the accompanying consolidated balance sheets, and contract liabilities are presented as a current liability in the accompanying consolidated balance sheets. The Company’s contracts vary in duration, with the duration of some larger contracts exceeding one year. Consistent with industry practices, the Company includes the amounts realizable and payable under contracts, which may extend beyond one year, in current assets and current liabilities. The vast majority of these balances are settled within one year.

Property and Equipment

The Company depreciates the cost of its property and equipment using the straight- line method over the estimated useful lives of the assets. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations for the period. The cost of maintenance and repairs is charged to operations as incurred; significant renewals improvements are capitalized. During the nine months ended September 30, 2024 and 2023, depreciation expense was $6,272 and $0, respectively. The estimated useful lives of the Company vehicles arefive years.

Intangible Assets

Intangible assets are amortized over their estimated useful lives. Each period, the Company evaluates the estimated remaining useful life of its intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization. Management tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets but at least annually on December 31st.

Impairment Assessment

The Company evaluates intangible assets and other long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. This includes but is not limited to significant adverse changes in business climate, market conditions or other events that indicate an asset’s carrying amount may not be recoverable. The recoverability of these assets is measured by comparing the carrying amount of each asset to the future cash flows the asset is expected to generate. If the cash flows used in the test for recoverability are less than the carrying amount of these assets, the carrying amount of such assets is reduced to fair value.

Earnin****gs Per Share

In accordance with accounting guidance now codified as ASC Topic 260,*“Earnings (Loss) per Share,”*basic earnings per share is computed by dividing net income by weighted average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. There were no dilutive shares outstanding during the nine months ended September 30, 2024 and 2023.

Recent Accountin****g Pronouncements

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about reportable segment’s profit or loss and assets that are currently required annually. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its condensed consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which enhances the transparency and decision usefulness of income tax disclosures by requiring; (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2025, with early adoption permitted. These amendments are to be applied prospectively, with retrospective application permitted. The Company is currently evaluating the impact this standard will have on its condensed consolidated financial statements.

The Company currently believes there are no other issued and not yet effective accounting standards that are materially relevant to our condensed consolidated financial statements.

Note 2. Acquisition of HLDCO LLC

On June 13, 2024 Claude Zdanow via Mount Olympus Ventures, Inc (“Mount Olympus”), purchased the 1,000 shares of Series A Preferred Stock from Elijah May directly. As a result of the transaction there was a change in control of the Company. On June 13, 2024, Elijah May, as the Company’s sole director, resigned from his positions as director, Chief Executive Officer, and President of the Company, effective as of June 13, 2024. Claude Zdanow was appointed as a director of the Company by its Board of Directors, holding the positions of President and Chief Executive Officer.

On June 17, 2024, the Company entered into the acquisition of 100% ownership of HLDCO, LLC, a Delaware limited liability company (the “Agreement”). The transaction was by and between the Company and the Members of HLDCO, LLC, which include Mount Olympus Ventures, Inc., Apollo Capital Corp., and M2B Funding Corp. Mount Olympus Ventures, Inc., via the owner Claude Zdanow, has a material relationship with the Company, via his appointment as a director and officer of the Company, and through Mount Olympus Ventures, Inc.’s acquisition of 100% of the Series A Preferred Stock of the Company.

The nature and amount of consideration given or received for the assets was exactly 3,645 shares of newly designated Series B Preferred Stock, par value $0.001 per share, exactly 6,570 shares of newly designated Series C Preferred Stock, par value, $0.001 per share, and exactly 100 shares of Series D Preferred Stock, par value $0.001 to be given to each of the Members of HLDCO, LLC as described in the Agreement.

On July 18, 2024, the Company filed the designations for the Series B, Series C, and Series D preferred shares pursuant the Agreement. On July 25, 2024, the Board of Directors issued those shares of respective preferred stock to the members of HLDCO, LLC, to complete the acquisition (the “Closing).

Management determined that the acquisition of HLDCO was a reverse acquisition as defined within ASC 805, and that HLDCO was the accounting acquirer. The Company determined that HLDCO was the accounting acquirer based on the guidance contained within ASC 805-40. The significant factors that led to the Company’s conclusion were (i) the Mr. Zdanow and the members of HLDCO obtained 98% of the voting interest of the Company through the preferred shares held by these parties, (ii) at Closing, the remaining Company shareholders held 2% of the voting interest of the Company, (iii) the composition of executive management and the governing body changed such that the sole director and executive officer of HLDCO became the sole director and shareholder of the Company which provided control over the operations of the Company, and (iv) HLDCO was significantly larger than the Company when considering both total assets and operations. As a result, the Company has applied purchase accounting as of the Closing of the acquisition and reflected the historical financial position and operations of HLDCO as the surviving entity. The assets and liabilities the Company were recognized at fair value as of the Closing and the results of its operations have been included within the consolidated statements of operations from that date forward with all historical activity reflective of the operations of HLDCO.

The assets acquired and liabilities assumed are recognized provisionally in the accompanying consolidated balance sheets at their estimated fair values as of the acquisition date. The initial accounting for the business combination is not complete as the Company is in the process of obtaining additional information for the valuation of acquired intangible assets and deferred tax liabilities, if any. The provisional amounts are subject to change to the extent that additional information is obtained about the facts and circumstances that existed as of the acquisition date. Under U.S. GAAP, the measurement period shall not exceed one year from the acquisition date and the Company will finalize these amounts no later than July 25, 2025. The estimated fair values as of the acquisition date are based on information that existed as of the acquisition date. During the measurement period the Company may adjust provisional amounts recorded for assets acquired and liabilities assumed to reflect new information that the Company has subsequently obtained regarding facts and circumstances that existed as of the acquisition date.

The Company determined the fair value of the consideration transferred using the fair value based on the number of shares that would have needed to be issued to provide the Company’s shareholders with an equivalent ownership interest in the combined entities post-Closing. The fair value of the Company’s common shares issued as consideration was based on the closing price of the Company’s common stock as of the Closing.

The consideration transferred was allocated to the assets acquired and liabilities assumed on a preliminary basis as of the acquisition date as follows:

The goodwill recognized as a result of the acquisition of the Company is attributable primarily to expected synergies and the assembled workforce. None of the goodwill is expected to be deductible for income tax purposes.

The amounts of revenue and loss of Reliant, included in the Company’s consolidated statements of operations for the three and nine months ended September 30, 2024 are as follows:

Consolidated unaudited pro forma information:

The following consolidated pro forma information assumes that the acquisition of HLDCO took place on January 1, 2023, for the statement of operations for the three and nine-month periods ended September 30, 2024 and 2023. These amounts have been estimated after applying the Company’s accounting policies

Note 3. Contracts in Process

The net asset (liability) position for pool construction contracts in process consisted of the following:

The net asset (liability) position for contracts in process is included in the accompanying consolidated balance sheets as follows:

Note 4. Concentrations of Risk

For the nine months ended September 30, 2024 and 2023, the Company had the follow customer concentrations:

As of December 31, 2023, one customer accounted for 28% of total accounts receivable. As of September 30, 2024, one customer accounted for 12% of total accounts receivable. Neither of these customers had more than 10% of total revenue during the periods ended September 30, 2024 and 2023.

Note 5. Related Party Transactions

Executive Expense Reimbursements

During the nine months ended September 30, 2024 and 2023, the Company recognized expense reimbursements in the form of informal, undocumented due on demand advances to the Company made by its CEO using his personal finances. This includes cash infusions as well as being expenses on behalf of the Company.

The Company repaid these advances as funds were available and in some instances remitted amounts in excess of the advances made which were applied to future expenses of the Company. The following tables detail the cash loaned, direct expenses paid and cash repayments made by the Company during the nine months ended September 30, 2024 and 2023.

As of September 30, 2024, $125,903 was due from the Company’s CEO and is reflected in ‘Due from executive’ in the accompanying consolidated balance sheets. As of December 31, 2023, $79,368, was due to the Company’s CEO and is reflected in ‘Due to executive’ in the accompanying consolidated balance sheets.

Revenues and Other Receivable

During the nine months ended September 30, 2024 and 2023, the Company recognized revenues of approximately $470,000 and $433,000 from entities which share common management. During the nine months ended September 30, 2024, the Company recognized an impairment related to the amounts owing from these affiliated entities in the amount of $405,614 due to the deterioration of the affiliates’ financial position. As of September 30, 2024, the total amount due from these affiliates was $922,358 which includes amounts earned in the previous year and all of which has been impaired as of September 30, 2024.

Note receivable

The Company has a note receivable with an entity controlled by the Company’s CEO in the amount of $400,700. This note receivable does not bear or accrue interest, is unsecured and due on demand.

Notes Payable

The Company has 4 notes payable due to a related party as described in Note 8. As of September 30, 2024 and December 31, 2023, accrued interest due under these notes was $-0- for both periods.

Note 6. Equity

Series A Preferred Stock

The Series A Preferred Stock (Series A Stock) consists of 1,000 shares. Each share of Series A Preferred Stock is redeemable, at the sole and complete option of the Company and then only with the consent of a majority of the holders of the Series A Preferred Stock for $1.00 per share. For so long as any shares of the Series A Preferred Stock remain issued and outstanding, the holders thereof, voting separately as a class, shall have the right to vote on all shareholder matters (including, but not limited to at every meeting of the stockholders of the Company and upon any action taken by stockholders ofthe Company with or without a meeting) equal to fifty-one percent (51%) of the total vote. For example, if there are 10,000 shares of the Company’s common stock issued and outstanding at the time of a shareholder vote, the holders of the Series A Preferred Stock, voting separately as a class, will have the right to vote an aggregate of 10,400 shares, out of a total number of 20,400 shares voting. For the sake of clarity and in an abundance of caution, the total voting shares outstanding at the time of any and all shareholder votes (i.e., the total shares eligible to vote on any and all shareholder matters) shall be deemed to include (a) the total Common Stock shares outstanding; (b) the voting rights applicable to any outstanding shares of preferred stock, other than the Series A Preferred Stock, if any; and (c) the voting rights attributable to the Series A Preferred Stock, as described herein, whether such Series A Preferred Stock shares are voted or not.

On June 13, 2024 Claude Zdanow purchased the 1,000 shares of Series A Preferred Stock from Elijah May directly. As a result of the transaction there was a change in control of the Company as further described in Note 2.

Series B Preferred Stock

The Series B Preferred Stock (Series B Stock) consists of 10,000 shares having a “Face Value” of $1,000 per share. Each share of Series B Preferred Stock converts into common stock at a conversion price equal to 90% of the Volume Weighted Average Price of the Company’s common stock for the 10 days prior to any conversion. In addition, holders of the Series B Preferred Stock shall receive a quarterly dividend equal to 2% of the total value of the Series B Preferred Stock, on a pro rata basis, issued and outstanding determined by multiplying the number of shares of Series B Preferred Stock times the Face Value. Dividends may be paid in cash, common stock or Series B Preferred Stock at that discretion of the holder. The Series B Preferred Stock also have preference in liquidation to all other classes unless otherwise waived by the Holders. The Series B Preferred Stock have no voting rights. Additional rights and obligations are described in the exhibit attached hereto.

Series C Preferred Stock

The Series B Preferred Stock (Series B Stock) consists of 10,000 shares having a “Face Value” of $1,000 per share. Each share of Series B Preferred Stock converts into common stock at a conversion price equal to 90% of the Volume Weighted Average Price of the Company’s common stock for the 10 days prior to any conversion. In addition, holders of the Series B Preferred Stock shall receive a quarterly dividend equal to 2% of the total value of the Series B Preferred Stock, on a pro rata basis, issued and outstanding determined by multiplying the number of shares of Series B Preferred Stock times the Face Value. Dividends may be paid in cash, common stock or Series B Preferred Stock at that discretion of the holder. The Series B Preferred Stock also have preference in liquidation to all other classes unless otherwise waived by the Holders. The Series B Preferred Stock have no voting rights. Additional rights and obligations are described in the exhibit attached hereto.

The Series C Preferred Stock (Series C Stock) consists of 6,570 shares, having a “Face Value” of $1,000 per share. Each share of Series C Preferred Stock converts into common stock at a conversion rate equal to 33,334 shares of common stock per share of Series B Preferred Stock. However, in the event of a Liquidation Event(1) the Series C Preferred Stock shall, in total, convert into exactly 51% of the sum of a) all Common Stock issued and outstanding; plus b) all the aggregate of all shares of Common Stock that would be issued upon the exercise of warrants or options, conversion of any convertible promissory notes, conversion of all other preferred shares, and any other instruments having vested rights to convert into Common Stock; plus c) the total of aggregate of all Series C Preferred Stock such that all Holders of Series C Preferred Stock shall hold exactly fifty-two percent (52%) of all issued and outstanding Common Stock, on a pro-rata basis, subject to the liquidation, merger, dissolution, winding up, or acquisition on a fully diluted basis. The Series C Preferred Stock shall be paid no dividends and have no voting rights. Additional rights and obligations are described in the exhibit attached hereto.

Series D Preferred Stock

The Series D Preferred Stock (Series D Stock) consists 100 shares having a “Face Value” of $1,000 per share. Each share of Series D Preferred Stock shall automatically convert into 750,000 shares of common stock, effective at such time that the Company has taken such steps to increase the authorized number of shares of common stock sufficient to honor the conversion of all shares of Series D Preferred Stock. Each share of Series D Preferred Stock shall have voting rights equal to 750,000 votes per share. Additional rights and obligations are described in the exhibit attached hereto.

Common Shares

The Company is authorized to issue 70,000,000 shares authorized, $0.001 par value. Each share of common stock is entitled to one vote on matters submitted to the shareholders for approval.

Note 7. Commitments and Contingencies

Leases

The Company leases approximately 1,000 square feet of office space in Austin, Texas. On March 28, 2022, the Company entered into a new lease agreement for the office space, which has a term of 24 months, through March 31, 2024, and a monthly rental cost of $1,515 for the period from April 1, 2022 to March 31, 2023 and $1,560 per month from April 1, 2023 to March 31, 2024, together with costs and expenses of approximately $725 per month for 2022. The real property lease contains provisions requiring payment of property taxes, utilities, insurance, maintenance and other occupancy costs applicable to the leased premise. As the Company’s leases do not provide implicit discount rates, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. On March 8, 2024, the company extended the office lease for a term of 20 months through November 30, 2025. The monthly rental cost for the period from April 1, 2024 to March 31, 2025 is $2,320 and for the rental cost for the period from April 1, 2024 to November 30, 2025 is $2,400.

On June 9, 2023, HLDCO entered into a lease arrangement with a third party for apartment space in Los Angeles, California, for the Company’s Chief Executive Officer. This lease requires monthly minimum payments of $12,650. The Company determined this lease represented an operating type lease at inception and recognized right-of-use asset and related lease liability of approximately $179,000.

Initially, the Company measured the right of use asset and liability associated with this lease using the following inputs:

The Company records rent on straight-line basis over the terms of the underlying lease. Estimated future minimum lease payments under the lease as of December 31, 2023 are as follows:

After netting off with $45,580 sublease rental income, rent expense for the nine months ended September 30, 2024 and 2023 was approximately $68,000 and $68,000 respectively, and was included in “general and administrative” expenses in the accompanying consolidated statements of operations. The Company paid approximately $68,000 and $68,000 respectively, in lease payments during the nine months ended September 30, 2024 and 2023 and are included in the Company’s operating cash flows for both periods. This lease expired on September 30, 2024 and was not renewed.

Payroll tax liabilities

For the year ended December 31, 2023, the Company did not remit federal income tax, social security, Medicare or local and state income taxes which were withheld from the Company’s employees payroll. The Company has estimated and accrued fines and penalties associated with the amounts which have not been remitted and includes this amounts in accrued expenses in the accompanying consolidated balance sheets. As of September 30, 2024 and December 31, 2023, the balance due was $462,267.

Note 8. Debt

Notes payable

Construction Loan

Effective on November 1, 2021, the Company’s wholly–owned subsidiary, Reliant Custom Homes, Inc., entered into an Extension of Real Estate Note and Lien with First United Bank and Trust Co. (“First United”), pursuant to which First United agreed to extend the due date of our $221,000 borrowing facility in connection with the construction loan on our custom home, the construction of which has been completed. Effective on April 28, 2024, Reliant Custom Homes, Inc., entered into another Extension of Real Estate Note and Lien with First United pursuant to which First United agreed to extend the due date to July 28, 2024. Amounts borrowed under the loan bear interest at the rate of 8.75% after the most recent modification, are secured by the land on which the Company has built a custom home, and are guaranteed by Reliant Pools, Inc., the Company’s wholly-owned subsidiary. On May 17, 2024, the Company closed on the sale of the custom home and repaid the outstanding balance of the construction loan in full along with all interest.

Line of Credit

On July 28, 2022, The Company entered into a $225,000 line of credit agreement with a financial institution. The line of credit matures on July 28, 2024, has an interest rate of 10% per annum and requires monthly interest only payments with all principal and accrued interest due at maturity. As of September 30, 2024, and December 31, 2023, the outstanding principal totaled approximately $224,000 and $225,000, respectively.

Note 9. Intangible assets

The Company’s intangible assets as of September 30, 2024 are summarized as follows:

The Company’s intangible assets as of December 31, 2023, are summarized as follows:

Future amortization of the Company’s intangible assets as of December 31, 2023 are as follows:

**Note 10.**Loan Receivable

On June 20, 2023, the Company entered into a promissory note with an independent contractor engaged by the Company. The note is due on December 20, 2024 and bears interest at 36% per annum. Any outstanding principal and accrued interest is due on the maturity date. The contractor also has the right to, in lieu of cash payments, provide future services to the Company in reduction of principal or interest.

Note 11. Segments

As a result of the HLDCO acquisition, the Company determined that there are two reportable segments. These segments have different strategic and economic goals and are managed separately because they require different technology and marketing strategies.

The Company’s chief executive officer is the chief operating decision maker and reviews the internal management reports for each segment at least quarterly. During the nine months ended September 30, 2024, there were no significant inter-company revenues or expenses. The chief operating decision maker assesses performance for each segment and decides how to allocate resources based on segment operating losses that also is reported on the consolidated statement of operations. The measure of segment assets is reported on the balance sheet as total consolidated assets. The accounting policies of each segment are the same as those described in the summary of significant accounting policies.

Information regarding each reportable segment for the nine months ended September 30, 2024, is as follows:

Note 12. Subsequent events

****The Company has assessed all events from September 30, 2024 through December 20, 2024, which is the date that these unaudited consolidated financial statements are available to be issued, there are not any material subsequent events that require disclosure in these unaudited consolidated financial statements.