Item 2. Management
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s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion in conjunction with our financial statements, which are included elsewhere in this report. The following information contains forward-looking statements. (See
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Forward-Looking Statements
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below and
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Risk Factors.
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)
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements reflect the Company
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s views with respect to future events based upon information available to it at this time. These forward-looking statements are subject to certain uncertainties and other factors that could cause actual results to differ materially from these statements. These uncertainties and other factors include, but are not limited to the risk factors described herein under the caption
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Risk Factors.
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The words
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anticipates,
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believes,
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estimates,
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expects,
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plans,
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projects,
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targets
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and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, changes in assumptions, future events or otherwise.
General
The Company is a shell company that conducts no active business operations and is seeking business opportunities for acquisition or participation by the Company.
The Report of Independent Registered Public Accounting Firm on the Company
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s 2015 audited financial statements addresses an uncertainty about the Company
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s ability to continue as a going concern, indicating that the Company has incurred losses since its inception and has no on-going operations. The report further indicates that these factors raise substantial doubt about the Company
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s ability to continue as a going concern. At September 30, 2016, the Company had a working capital deficit of $108,027 and an accumulated deficit since inception of $609,441. The Company incurred net losses of $106,593 and $50,511 for the nine months ended September 30, 2016 and 2015, respectively. The Company has not entered into any agreements or arrangements for the provision of additional debt or equity financing and there can be no assurance that it will be able to obtain the additional debt or equity capital required to continue its operations.
The Three and Nine Months ended September 30, 2016 compared to September 30, 2015
The Company did not conduct any operations during the three and nine month periods ended September 30, 2016 or 2015. At September 30, 2016, the Company had cash in the amount of $69,919, compared to cash at December 31, 2015 in the amount of $24,653. At September 30, 2016, the Company had total current assets of $71,794, compared to $74,653 at December 31, 2015. At September 30, 2016 the Company had total current liabilities of $179,821, compared to $76,087 at December 31, 2015. The increase in current liabilities mainly represents the issuance of a promissory note for $35,000 and the accrual of general corporate expenses incurred. The Company had a working capital deficit of $108,027 at September 30, 2016 compared to a working capital deficit of $1,434 at December 31, 2015.
The Company did not generate revenues during the three and nine month periods ending September 30, 2016 or 2015. The Company incurred general and administrative expenses of $18,898 during the three months ended September 30, 2016, compared to $13,343 during the three months ended September 30, 2015. During the nine months ended September 30, 2016, the Company incurred $42,185 in general and administrative expenses compared to $29,758 during the nine months ended September 30, 2015. Such expenses consist primarily of legal and accounting fees as well as taxes and annual fees required to maintain the Company
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s corporate status.
The Company incurred other expenses of $10,927 during the three months ended September 30, 2016 compared to $19,253 during the three months ended September 30, 2015. During the nine months ended September 30, 2016, the Company incurred other expenses of $64,408 compared to $20,753 during the nine months ended September 30, 2015. Total other expenses consist mainly of interest expense related to the notes payable due from the Company, netted with interest income of $1,383 and $4,484 generated for the three and nine months ended September 30, 2016, respectively ($0 interest income for the three and nine months ended September 30, 2015).
The Company incurred a net loss of $29,825 during the three months ended September 30, 2016, compared to a net loss of $32,596 during the three months ended September 30, 2015. During the nine months ended September 30, 2016, the Company incurred a net loss of $106,593, compared to $50,511 during the nine months ended September 30, 2015. The increase in net loss in 2016 as compared to 2015 is mainly the result of the amortization of debt discount in the amount of $58,334 related to the convertible promissory note which was recorded during the nine months ended September 30, 2016, as well as a $12,427 increase in general and administrative expenses.
The Company has never had substantial ongoing operations. As a result, since its inception on July 26, 1990, the Company has an accumulated deficit of $609,441.
Liquidity and Capital Resources
Net cash used by operating activities was $39,734 and $18,755 during the nine months ended September 30, 2016 and 2015, respectively.
Net cash provided by investing activities was $50,000 and $-0- during the nine months ended September 30, 2016 and 2015, respectively.
Net cash provided by financing activities was $35,000 and $100,000 during the nine months ended September 30, 2016 and 2015, respectively.
Since the Company does not generate any revenues from operations, it is dependent on sales of securities, loans, or contributions from its stockholders in order to pay its operating costs. In addition, in the event the Company locates a suitable candidate for potential acquisition, the Company will require additional funds to pay the costs of negotiating and completing the acquisition of such candidate. The Company has not entered into any agreement or arrangement for the provision of any additional funding and no assurances can be given that such funding will be available to the Company on terms acceptable to it or at all.
The Company cannot presently foresee the cash requirements of any business opportunity which may ultimately be acquired by the Company. However, since it is likely that any business it acquires will be involved in active business operations, the Company anticipates that an acquisition will result in increased cash requirements as well as increases in the number of employees of the Company.
Off-Balance Sheet Arrangements
The Company has not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors.
Critical Accounting Policies
Due to the lack of current operations and limited business activities, the Company does not have any accounting policies that it believes are critical to facilitate an investor
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s understanding of the Company
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s financial and operating status.
Recent Accounting Pronouncements
On June 10, 2014, the Financial Accounting Standards Board ("FASB") issued update ASU 2014-10,
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Development Stage Entities
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(Topic 915). Amongst other things, the amendments in this update removed the definition of development stage entity from Topic 915, thereby removing the distinction between development stage entities and other reporting entities from US GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information on the statements of income, cash flows and shareholders
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equity, (2) label the financial statements as those of a development stage entity; (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The amendments are effective for annual reporting periods beginning after December 31, 2014 and interim reporting periods beginning after December 15, 2015. As such, the Company has not labeled the financial statements as those of a development stage entity and has not presented inception-to-date information on the respective financial statements.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer/Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (
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the Exchange Act
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) as of September 30, 2016, the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer/Chief Financial Officer, who is our sole officer and director, concluded that our disclosure controls and procedures as of September 30, 2016 were not effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC
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s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer/Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting during the quarter ended September 30, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
In connection with an evaluation of the effectiveness of the Company
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s internal control over financial reporting as of September 30, 2016, using the COSO framework (1992), our management, with the participation of our Chief Executive Officer/Chief Financial Officer identified a weakness in the Company
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s internal control, which arises from the fact that the Company
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s principal executive and principal financial officers are the same person, which does not allow for segregation of duties. Our management believes the materiality of this weakness is mitigated by the Company
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s status as a shell company with no significant assets or liabilities, no business operations and a limited number of transactions each year, and that the weakness does not have a material effect on the accuracy and completeness of our financial reporting and disclosure as included in this report.