RELIANT HOLDINGS, INC. The following discussion of the Company's historical performance and financial condition should be read together with the consolidated financial statements and related notes in "Item 8. Financial Statements and Supplemental Data" of this Report. This discussion contains forward-looking statements based on the views and beliefs of our management, as well as assumptions and estimates made by our management, see "Cautionary Statement Regarding Forward-Looking Information". These statements by their nature are subject to risks and uncertainties, and are influenced by various factors. As a consequence, actual results may differ materially from those in the forward-looking statements. See "Item 1A. Risk Factors" of this report for the discussion of risk factors.
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:
? Plan of Operations. A description of our plan of operations for the next
12 months including required funding.
? Results of Operations. An analysis of our financial results comparing the
years ended December 31, 2022 , and 2021.
? Liquidity and Capital Resources. An analysis of changes in our
consolidated balance sheets and cash flows and discussion of our financial
condition.
? Critical Accounting Policies and Estimates. Accounting estimates that we
believe are important to understanding the assumptions and judgments
incorporated in our reported financial results and forecasts.
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Plan of Operations
We had working capital of
Results of Operations
For the Year Ended
We had revenue of
We had cost of goods sold of
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Cost of goods sold increased mainly due to an increase in plaster, pool
equipment, masonry, stone and tile and labor costs, mainly due to increased
costs of materials and labor due to supply constraints and increases in pricing
due to inflation. The timing of our cost of goods sold is materially impacted
based on the overall scope and timing of the projects we are working on. In
general, costs of goods sold for the year ended
For the Year For the Year
Ended Ended
Cost of Goods Sold December 31, December 31, Increase / Percentage
Expense 2022 2021 (Decrease) Change
Cost of decking $ 430,208 $ 323,217 $ 106,991 33.1 %
Plaster used in the
construction of pools 217,110 127,108 90,002 70.8 %
Gunite used in the
construction of pools 330,622 252,293 78,329 31.0 %
Pool equipment used to
filter and circulate the
water used in our pools 502,595 297,644 204,951 68.9 %
Masonry, stone and tile
installed in and around
our pools and coping
expenses associated
therewith 521,764 230,754 291,010 126.1 %
Excavation and steel
expenses 376,831 342,322 34,509 10.1 %
Other, including labor 945,084 585,630 359,453 61.4 %
Total $ 3,324,213 $ 2,158,969 $ 1,165,244 54.0 %
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
We had operating expenses consisting solely of general and administrative
expenses of
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We had interest income of
We had interest expense of
We had a gain on forgiveness of debt of
We had a
We had net income of
Liquidity and Capital Resources
We had total assets of
We had total liabilities of
The Company compensated
On
On
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On
On
We had working capital of
We had
We had
We had
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.
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Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity
with
Revenue Recognition
On
Revenue is recognized based on the following five step model:
- Identification of the contract with a customer
- Identification of the performance obligations in the contract
- Determination of the transaction price
- Allocation of the transaction price to the performance obligations in the
contract
- Recognition of revenue when, or as, the Company satisfies a performance
obligation
All of the Company's revenue is currently generated from the design and installation of swimming pools. As such no further disaggregation of revenue information is provided.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Our 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
Revenue for our contracts that satisfy the criteria for over time recognition is recognized as the work progresses. The majority of our revenue is derived from construction contracts and projects that typically span between 4 to 12 months. Our 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.
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Performance Obligations Satisfied at a Point in Time
Revenue for our contracts that do not satisfy the criteria for over time recognition is recognized at a point in time. Substantially all of our revenue recognized at a point in time is for work performed for pool maintenance or repairs. Unlike our 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 our 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
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 prices for our 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. Our estimates of variable
consideration and determination of whether to include estimated amounts in
transaction price are based largely on an assessment of our 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 our 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 adjustment on
any one contract was material to our consolidated financial statements for the
year ended
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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 our 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.
The Company recognizes revenue from the design and installation of swimming pools.
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 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.
Classification of Construction Contract-related Assets and Liabilities. Costs and estimated earnings in excess of billings on uncompleted contracts are presented as a current asset in the accompanying consolidated balance sheets, and billings in excess of costs and estimated earnings on uncompleted contracts 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.
Equipment. Equipment, consisting mainly of vehicles, is stated at cost. The
Company depreciates the cost of 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 years
ended
Recently Issued Accounting Standards
For more information on recently issued accounting standards, see "Note 1. The Company and Summary of Significant Accounting Policies" to the Notes to Consolidated Financial Statements included herein under "Item 8. Financial Statement and Supplemental Data".
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