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2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In this section, “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” references to “we,” “us,” or “our,” refer to New York Global Innovations Inc. and its consolidated subsidiaries and dollar amounts are in thousands, except as otherwise stated.
This Quarterly Report on Form 10-Q contains statements that may constitute “forward-looking statements.” Generally, forward-looking statements include words or phrases such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects,” “could,” “may,” “might,” “should,” “will,” the negative of such terms, and words and phrases of similar import. For example, when we discuss possible strategic alternatives, we are using forward-looking statements. Such statements are based on management’s current expectations and are subject to a number of risks and uncertainties, including, but not limited to, the risks detailed from time to time in our filings with the Securities and Exchange Commission, or the SEC. These risks and uncertainties could cause our actual results to differ materially from those described in our forward-looking statements. Any forward-looking statement represents our expectations or forecasts only as of the date it was made and should not be relied upon as representing its expectations or forecasts as of any subsequent date. Except as required by law, we undertake no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, even if our expectations or forecasts change.
The following discussion and analysis should be read in conjunction with the financial statements, related notes and other information included in this Quarterly Report on Form 10-Q and with the Risk Factors included in Part I, Item 1A of our Annual Report.
OVERVIEW
The Company’s Board of Directors is now exploring strategic alternatives to deploy the proceeds of the Asset Sale, which may include future acquisitions, a merger with another company, or other actions to redeploy capital, including, without limitation, the sale of the public shell company into which the net proceeds may be retained.
THREE MONTHS ENDED MARCH 31, 2016 COMPARED WITH THREE MONTHS ENDED MARCH 31, 2015
REVENUES.
Since the closing of the Asset Sale on February 28, 2014, the Company no longer has revenue-producing operations.
GENERAL AND ADMINISTRATIVE EXPENSES.
General and administrative expenses consist primarily of compensation costs for administrative, finance and general management personnel, insurance, legal, accounting and administrative costs. General and administrative expenses increased by $6, or 18%, to $40 in the three months ended March 31, 2016, from $34 in the three months ended March 31, 2015. This increase in general and administrative expenses was primarily related to increases in professional expenses.
FINANCIAL INCOME, NET.
Financial income, net, decreased by $1, or 100%, from financial income, net of $1 in the three months ended March 31, 2015 to zero in the three months ended March 31, 2016. This change in financial income, net was primarily related to $2 of financial income related to the change in exchange rates and a $2 expense related to a decrease in the value of warrants.
NET LOSS.
We incurred a net loss of $40 in the three months ended March 31, 2016, compared with a net loss of $33 in the three months ended March 31, 2015, which represents an increase of $7 in net loss. This increase in net loss was primarily related to the increase in our operational expenses due to the increase in professional expenses, an increase in financial income and an expense related to a decrease in the value of our warrants.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS.
As of March 31, 2016, the Company has no contractual commitments.
LIQUIDITY AND CAPITAL RESOURCES.
We have incurred substantial losses since our inception in April 1997. As of March 31, 2016, we had an accumulated deficit of $17,735 and a positive working capital (current assets less current liabilities) of $614. Losses will probably continue in the foreseeable future.
We do not have any material capital commitments for capital expenditures as of March 31, 2016.
We have sustained significant operating losses in recent periods, which has resulted in a significant reduction in our cash reserves. Due to the Asset Sale, the Company no longer has revenue-producing operations. The Company believes that it will continue to experience losses and negative cash flows from operating activities in the near future and will not be able to return to positive cash flow without obtaining additional financing in the near term or entering into a business transaction. If additional funds are raised through the issuance of equity securities or entering into a business transaction, the Company’s existing stockholders will experience significant further dilution. In order to conserve the Company’s cash and manage its liquidity, the Company has implemented cost-cutting initiatives.
As a result of the Asset Sale, the Company received $841 in cash, plus Spectra’s and the Company’s good faith estimate of the inventory value at the closing date, and $134, an amount equal to 50% of all pre-closing accounts receivable collected after the closing date. In addition, in March 2015, the Company received $200 previously held by Wells Fargo Bank, National Association in accordance with the terms of an escrow agreement to secure the Company’s obligations to pay Spectra any indemnification claims for a period of up to one year after the closing date.
Following the Asset Sale, the Company’s Board of Directors is exploring strategic alternatives to deploy proceeds of the Asset Sale, which may include future acquisitions, a merger with another company, or other actions to redeploy capital, including, without limitation, the sale of the public shell company into which the net proceeds may be retained.
As of March 31, 2016, we had cash and cash equivalents of $577, compared to $769 as of March 31, 2015. We had negative cash flows from operating activities of $51 in the three months ended March 31, 2016 compared to positive cash flows of $156 in the three months ended March 31, 2015. The negative cash flows from operating activities in the three months ended March 31, 2016 are attributable mainly to a net loss of $40, an increase in other accounts receivable, prepaid expenses of $9, and a change in warrants to issue shares of $2.
We did not have any cash flows from investing activities in the three months ended March 31, 2016, compared to positive cash flows from investing activities of $205 for the three months ended March 31, 2015.