(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of
“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
¨
The number of shares of Common Stock, par
value $0.001 per share, outstanding as of May 11, 2017 was 1,744,569.
PART I—FINANCIAL INFORMATION
Item 1.
Financial Statements.
SMG INDIUM RESOURCES LTD.
CONDENSED BALANCE SHEETS
(Unaudited)
ASSETS
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
535,041
|
|
|
$
|
614,490
|
|
Prepaid expenses and other current assets
|
|
|
12,245
|
|
|
|
18,678
|
|
Total Assets
|
|
$
|
547,286
|
|
|
$
|
633,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
68,490
|
|
|
$
|
80,565
|
|
Total Liabilities
|
|
|
68,490
|
|
|
|
80,565
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity:
|
|
|
|
|
|
|
|
|
Preferred stock - $0.001 par value: authorized 1,000,000 shares at March 31, 2017 and December 31, 2016;
|
|
|
|
|
|
|
|
|
issued and outstanding none at March 31, 2017 and December 31, 2016
|
|
|
-
|
|
|
|
-
|
|
Common stock - $0.001 par value: authorized 25,000,000 shares at March 31, 2017 and December 31, 2016;
|
|
|
|
|
|
|
|
|
issued 1,883,639 shares at March 31, 2017 and December 31, 2016; and outstanding
|
|
|
|
|
|
|
|
|
1,744,569 shares at March 31, 2017 and December 31, 2016
|
|
|
1,884
|
|
|
|
1,884
|
|
Additional paid-in capital
|
|
|
7,279,464
|
|
|
|
7,279,464
|
|
Accumulated deficit
|
|
|
(6,607,854
|
)
|
|
|
(6,534,047
|
)
|
Less treasury stock at cost: 139,070 shares at March 31, 2017 and December 31, 2016
|
|
|
(194,698
|
)
|
|
|
(194,698
|
)
|
Total Stockholders' Equity
|
|
|
478,796
|
|
|
|
552,603
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
547,286
|
|
|
$
|
633,168
|
|
The accompanying notes are an integral part
of these unaudited condensed financial statements.
SMG INDIUM RESOURCES LTD.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
For the Three Months Ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Operating costs:
|
|
|
|
|
|
|
|
|
Operating expenses - related parties
|
|
$
|
35,000
|
|
|
$
|
35,000
|
|
Other general and administrative expenses
|
|
|
38,977
|
|
|
|
72,382
|
|
Total operating costs
|
|
|
73,977
|
|
|
|
107,382
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(73,977
|
)
|
|
|
(107,382
|
)
|
|
|
|
|
|
|
|
|
|
Other income:
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
170
|
|
|
|
215
|
|
Net loss
|
|
$
|
(73,807
|
)
|
|
$
|
(107,167
|
)
|
|
|
|
|
|
|
|
|
|
Net Loss Per Share
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.04
|
)
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Shares Outstanding
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
1,744,569
|
|
|
|
1,744,569
|
|
The accompanying notes are an integral part
of these unaudited condensed financial statements.
SMG INDIUM RESOURCES LTD.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For the Three Months Ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(73,807
|
)
|
|
$
|
(107,167
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Decrease in prepaid expenses and other current assets
|
|
|
6,433
|
|
|
|
24,697
|
|
(Decrease) increase in accounts payable and accrued expenses
|
|
|
(12,075
|
)
|
|
|
16,544
|
|
Net cash used in operating activities
|
|
|
(79,449
|
)
|
|
|
(65,926
|
)
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(79,449
|
)
|
|
|
(65,926
|
)
|
Cash and cash equivalents, at beginning of period
|
|
|
614,490
|
|
|
|
960,351
|
|
Cash and cash equivalents, at end of period
|
|
$
|
535,041
|
|
|
$
|
894,425
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosure - cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
The accompanying notes are an integral part
of these unaudited condensed financial statements.
SMG INDIUM RESOURCES LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1 — Organization and Nature of Business and
Basis of Presentation
Organization and Nature of Business
SMG Indium Resources Ltd. (the “Company”)
is a corporation established pursuant to the laws of the State of Delaware on January 7, 2008. From inception through December
31, 2014, the Company operated in a single-segment business whose primary business purpose was to stockpile indium, a specialty
metal that is used as a raw material in a wide variety of consumer electronics manufacturing applications. As of December 31, 2014,
the Company sold all of the indium held in its stockpile. As a result, the Company is no longer in the business of purchasing and
selling indium. The Company’s board of directors has begun evaluating strategic options including the acquisition of a new
line of business or the sale or full liquidation of the Company. In connection therewith, the Company engaged Brack Advisors LLC
(“Brack”), a company owned by Richard A. Biele, one of our directors, to assist the Company in identifying, evaluating
and negotiating strategic transactions. However, there can be no assurance that the Company will enter into any such transaction,
and if so, on terms favorable to the Company.
In January 2016, the Company entered into
an agreement with Nano-Cap Advisors LLC (“Nano” and “2016 Nano Agreement”) to perform services normally
provided by a chief executive officer of the Company, as determined and directed by the Company, and provide office facilities
for the Company for an annual fee of $70 thousand in 2016. Mr. Ailon Z. Grushkin, the Company’s chairman, chief executive
officer and president, is the only member of Nano. The Company has agreed to pay Nano $35 thousand in equal installments in the
first two quarters of 2017 under the 2016 Nano Agreement, as amended (“Amended 2016 Nano Agreement”).
At March 31, 2017, the Company
had approximately $535 thousand in cash and cash equivalents. Our annual cash operating expenses are estimated to
be approximately $0.3 million in 2017 while the Company reviews its strategic options. Accordingly, the Company believes that
it has sufficient funds to sustain operations through at least May 15, 2018. Although the Company does not believe it will
need to raise additional funds in order to meet the expenditures required for operating its business through May 15, 2018,
the Company may need to raise additional capital if it encounters unforeseen costs or if cash is needed for any
corporate initiatives. Although, currently the Company is not a party to any agreement with respect to potential investments
in, or acquisitions of businesses, it may enter into these types of arrangements in the future, which could also require it
to seek additional equity or debt financing. Additional funds may not be available on terms favorable to the Company or at
all. The Company has begun evaluating strategic options including the merger or acquisition of a new line of business or the
sale or full liquidation of the Company. There can be no assurances that we will enter into any such transactions, and if so,
on terms favorable to the Company.
Basis of Presentation
The accompanying interim unaudited condensed
financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and
with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (the
“SEC”). Accordingly, these interim unaudited condensed financial statements do not include all of the disclosures
required by U.S. GAAP for complete financial statements. These interim unaudited condensed financial statements should
be read in conjunction with the Company’s audited financial statements included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2016, as filed with the SEC. In the opinion of management, the interim unaudited condensed
financial statements included herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair
presentation of the results of operations for the interim periods presented. The condensed balance sheet at December 31, 2016 has
been derived from the Company’s audited balance sheet as of December 31, 2016 included in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2016, as filed with the SEC. Operating results for the three months ended March 31,
2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 or any interim period.
Note 2 — Summary of Significant Accounting Policies
Use of Estimates
The preparation of the condensed financial
statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial
statements and the reported amounts of expenses during the reporting period. The most significant estimates relate to share-based
compensation and income taxes. Actual results could differ from those estimates under different assumptions and conditions.
Cash and Cash Equivalents
The Company considers all highly liquid
instruments with original maturities of 90 days or less at the time of purchase to be cash equivalents.
SMG INDIUM RESOURCES LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 2 — Summary of
Significant Accounting Policies, continued
Basic and Diluted Net Loss per Share
The Company presents both basic and diluted
net loss per share on the face of the condensed statements of operations. Basic net loss per share is computed by dividing net
loss by the weighted average number of shares of common stock outstanding during the period. Diluted per share calculations give
effect to all potentially dilutive shares of common stock outstanding during the period including, stock options and warrants and,
using the treasury-stock method. If anti-dilutive, the effect of potentially dilutive shares of common stock is ignored. For the
three months ended March 31, 2017 and 2016, 377,500 and 7,318,700, respectively, potentially issuable shares of common stock have
been excluded from the calculation because their effect would be antidilutive due to the Company’s net loss.
Income Taxes
Income taxes are accounted under the asset
and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences
between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The
portion of any deferred tax asset for which it is more likely than not that a tax benefit will not be realized must then be offset
by recording a valuation allowance. A valuation allowance has been established against all of the deferred tax assets, as it is
more likely than not that these assets will not be realized given the Company’s expected operating losses. The Company recognizes
the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions
are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are
reflected in the period in which the change in judgement occurs. The Company recognizes potential interest and penalties, if any,
related to income tax positions as a component of the provision for income taxes on the condensed statements of operations.
For the three months ended March 31, 2017
and 2016, no income taxes were recorded due to the Company’s net loss.
Share-Based Payment Arrangements
The Company measures the cost of
employee services received in exchange for an award of equity instruments (share-based payments or “SBP”) based
on the grant-date fair value of the award. That cost is recognized over the period during which an employee is required to
provide service in exchange for the SBP award—the requisite service period (vesting period). For SBP awards subject to
conditions, compensation is not recognized until the performance condition is probable of occurrence. The grant-date fair
value of share options is estimated using the Black-Scholes-Merton option-pricing model. Compensation expense for SBP awards
granted to nonemployees is remeasured each period as the underlying options vest. No SBP awards were granted during
the three months ended March 31, 2017 and 2016.
Concentration of Market Risk
The Company maintains cash deposits with
banks that at times exceed applicable Federal Deposit Insurance Corporation limits. The Company reduces its exposure to credit
risk by maintaining such deposits with high-quality financial institutions. The Company has not experienced any losses in such
accounts. At March 31, 2017, the Company had cash on deposit of approximately $285 thousand in excess of federally insured limits
of $250 thousand.
Fair Value
The Company utilizes valuation techniques
that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines
fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous
market. For cash and cash equivalents and accounts payable, the carrying amounts approximated the fair values because of the immediate
or short-term nature of those instruments.
Reclassifications
Certain prior period expense amounts
have been reclassified for consistency with the current period presentation.
SMG INDIUM RESOURCES LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 3 — Stockholders’ Equity
Equity Compensation Plan
Under the Company’s 2008 Equity Incentive
Plan (the “Plan”), the Company may grant incentive stock options, nonqualified stock options, restricted and unrestricted
stock awards and other stock-based awards. Pursuant to the Plan, 1,000,000 shares of common stock are reserved for issuance under
the Plan. Options are granted with exercise prices equal to or greater than the fair value of the common stock on the date of grant.
The terms of the options are approved by the Company’s board of directors or one of its committees. Options granted to date
have vested immediately and expire in five years. At March 31, 2017, there were 622,500 options available under the Plan for future
grants.
Stock Options
Summary stock option information is as
follows:
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
Exercise Price
|
|
|
Average
|
|
|
|
Number
|
|
|
Exercise Price
|
|
|
Range
|
|
|
Exercise Price
|
|
Outstanding, December 31, 2016
|
|
|
377,500
|
|
|
$
|
277,150
|
|
|
|
$0.24-3.40
|
|
|
$
|
0.73
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cancelled, Forfeited or Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding, March 31, 2017
|
|
|
377,500
|
|
|
$
|
277,150
|
|
|
|
$0.24-3.40
|
|
|
$
|
0.73
|
|
The weighted average remaining contractual
life is 3.7 years for stock options outstanding at March 31, 2017. At March 31, 2017 and 2016, there was $3 thousand and $0 thousand,
respectively, in intrinsic value of outstanding options.
Note 4 — Related Party Transactions
In January 2016, the Company entered into
the 2016 Nano Agreement to perform services normally provided by a chief executive officer of the Company, as determined and directed
by the Company, and provide office facilities for the Company for an annual fee of $70 thousand in 2016. Mr. Grushkin, the Company’s
chairman, chief executive officer and president, is the only member of Nano. The Company has agreed to pay Nano $35 thousand in
2017 under the Amended 2016 Nano Agreement, payable in equal installments in the first two quarters of 2017. During each of the
three months ended March 31, 2017 and 2016, the Company paid Nano approximately $18 thousand.
In January 2016, the Company
entered into a consulting agreement with Brack (the “Brack Agreement”), that provided for the payment of $50
thousand in 2016. Pursuant to the terms of the Brack Agreement, Mr. Biele, one of our directors, is to assist the Company in
identifying, evaluating and negotiating strategic transactions including but not limited to the acquisition of a new line of
business and or a reverse merger. In March 2017, we entered into an amended consulting agreement (“Amended Brack
Agreement”) with Brack, a related party. Pursuant to the terms of the Amended Brack Agreement, Brack will continue to
assist in identifying, evaluating and negotiating strategic transactions for the Company during 2017 for a fee of $25
thousand, payable in equal installments in the first two quarters of 2017. Approximately $13 thousand was paid under the
Amended Brack Agreement in the first quarter of both 2017 and 2016.
The Company engaged a relative of one
of its directors to perform outsourced secretarial services for the Company at a rate of $5 thousand per quarter in 2016 and
agreed to pay $5 thousand in the first and second quarters of 2017 for these services. Accordingly the Company paid $5 thousand in each of the
three months ended March 31, 2017 and 2016 to such relative.
SMG INDIUM RESOURCES LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 5 — Commitments and Contingencies
Consulting Agreements
As described in note 4, the Company
is required to pay a fee in 2017 to Nano, a related party, of approximately $35 thousand in under the Amended 2016 Nano
Agreement and $25 thousand to Brack for services to be performed by Richard A. Biele, a director of the Company.
Compensation
The Company has an arrangement with its
chief financial officer for an annual aggregate base compensation of $30 thousand in 2017, to be paid in equal payments in the
first two quarters of 2017. The compensation committee of the board of directors has approved the payment of $10 thousand per year
and $1 thousand for each meeting attended in person to the nonexecutive board member who is not compensated under another
consulting agreement.
Note 6 — Subsequent Events
The Company evaluates events that have
occurred after the balance sheet date but before the condensed financial statements are issued. Based upon the evaluation, the
Company did not identify any recognized or unrecognized subsequent events that have required adjustment or disclosure in the condensed
financial statements.
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
Cautionary Note Regarding Forward-Looking
Statements
Unless otherwise
indicated, the terms “SMG Indium,” “SMG,” the “Company,” “we,” “us,”
and “our” refer to SMG Indium Resources Ltd. In this Quarterly Report on Form 10-Q, we may make certain
forward-looking statements, including statements regarding our plans, strategies, objectives, expectations, intentions and resources
that are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.
The statements contained
in this Quarterly Report on Form 10-Q that are not historical fact are forward-looking statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995), within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as amended. Forward-looking statements may be identified by
the use of forward-looking terminology such as “should,” “could,” “may,” “will,”
“expect,” “believe,” “estimate,” “anticipate,” “intends,” “continue,”
or similar terms or variations of those terms or the negative of those terms. These statements appear in a number of
places in this Form 10-Q and include statements regarding the intent, belief or current expectations of SMG Indium Resources Ltd.
Forward-looking statements are merely our current predictions of future events. Investors are cautioned that any such forward-looking
statements are inherently uncertain, are not guaranties of future performance and involve risks and uncertainties. Actual results
may differ materially from our predictions. There are a number of factors that could negatively affect our business and the value
of our securities, including, but not limited to, fluctuations in the market price of our common stock; changes in our plans, strategies
and intentions; changes in market valuations associated with our cash flows and operating results; the impact of significant acquisitions,
dispositions and other similar transactions; our ability to attract and retain key employees; changes in financial estimates or
recommendations by securities analysts; asset impairments; decreased liquidity in the capital markets; and changes in interest
rates. Such factors could materially affect our Company's future operating results and could cause actual events to differ materially
from those described in forward-looking statements relating to our Company. Although we have sought to identify the most significant
risks to our business, we cannot predict whether, or to what extent, any of such risks may be realized, nor is there any assurance
that we have identified all possible issues that we might face. We assume no obligation to update our forward-looking statements
to reflect new information or developments. We urge readers to carefully review and consider the various disclosures we make in
this report and our other reports filed with the Securities and Exchange Commission (“SEC”) that attempt to advise
interested parties of the risks, uncertainties and other factors that may affect our business including the risk factors disclosed
in our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC.
Overview
We were incorporated under the laws of the
State of Delaware on January 7, 2008. From inception through December 31, 2014, our primary business purpose was to stockpile
indium, a specialty metal that is used as a raw material in a wide variety of consumer electronics manufacturing applications.
As of December 31, 2014, we sold all of the indium from our stockpile. As a result, we are no longer in the business of purchasing
and selling indium. We have begun evaluating strategic options including the acquisition of a new line of business or the
sale or full liquidation of the Company. In connection therewith, we have engaged Brack Advisors LLC (Brack), a company owned by
Richard A. Biele, one of our directors, to assist in identifying, evaluating and negotiating strategic transactions. We have agreed
to pay Brack $25 thousand in 2017 for these services under the Brack Agreement, as amended (Amended Brack Agreement). However,
there can be no assurance that we will enter into any such transaction, and if so, on terms favorable to us.
At March 31, 2017,
we had approximately $535 thousand in cash and cash equivalents. Our annual cash operating expenses are estimated to be approximately
$0.3 million in 2017 while we review our strategic options. Accordingly, we believe that we have sufficient funds to sustain operations
for at least through May 15, 2018.
In 2016, management
services were provided under an agreement with Nano-Cap Advisors LLC (Nano and 2016 Nano Agreement) in which Ailon Z. Grushkin,
chairman of our board, president and chief executive officer is the sole member. Under the agreement, which was approved
by our Board, we paid Nano $70 thousand in 2016 to provide management services and office space. During the first quarter of 2017,
we entered into an amendment to the 2016 Nano Agreement (Amended Nano 2016 Agreement), under which Nano will continue to provide
such services in 2017 for a fee of $35 thousand.
We are not legally
prohibited from pursuing other business strategies pursuant to our certificate of incorporation, as amended, or any other corporate
document. We will promptly notify stockholders of any modifications to our stated business plan. Our operations have been limited
to purchasing, stockpiling, lending or leasing the metal indium. In 2014, we sold our entire indium stockpile. We have begun evaluating
strategic options including the merger or acquisition of a new line of business or the sale or full liquidation of the Company,
which would require approval of our Board and will require stockholder approval.
Critical Accounting Policies and
Estimates
The preparation for
financial statements and related disclosures in conformity with United States generally accepted accounting principles (U.S. GAAP)
requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying
notes. For a description of our significant accounting policies, see notes to unaudited condensed financial statements –
note 2
Summary of Significant Accounting Policies
. Of these policies, the following are considered critical to an understanding
of the Company’s condensed financial statements as they require the application of the most difficult, subjective and complex
judgments: (1) Use of Estimates, (2) Share-Based Payment Arrangements, and (3) Income Taxes. Management will base its estimates
on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results
could differ from these estimates under different assumptions or conditions.
Results of Operations
The results of operations for the three
months ended March 31, 2017 and 2016 are as follows:
|
|
For the Three Months Ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Operating costs:
|
|
|
|
|
|
|
|
|
Operating expenses - related parties
|
|
$
|
30,000
|
|
|
$
|
30,000
|
|
Other general and administrative expenses
|
|
|
43,977
|
|
|
|
77,382
|
|
Total operating costs
|
|
|
73,977
|
|
|
|
107,382
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(73,977
|
)
|
|
|
(107,382
|
)
|
|
|
|
|
|
|
|
|
|
Other income:
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
170
|
|
|
|
215
|
|
Net loss
|
|
$
|
(73,807
|
)
|
|
$
|
(107,167
|
)
|
|
|
|
|
|
|
|
|
|
Net Loss Per Share
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.04
|
)
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Shares Outstanding
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
1,744,569
|
|
|
|
1,744,569
|
|
Three Months Ended March 31, 2017
Compared to Three Months Ended March 31, 2016
The Company had no
sales in the first quarter of 2017 and 2016, as we sold our remaining stockpile of indium during 2014 and exited that business.
For the three
months ended March 31, 2017, total operating expenses were approximately $74 thousand. For the comparable three-month period in
2016, total operating costs were approximately $107 thousand, representing a 31% decrease. The decrease was due principally
to lower D&O insurance, professional fees and state taxes. As we explore strategic initiatives, we expect that our annual cash
operating expenses will approximate $.3 million.
We recorded no income
taxes during the first quarters of 2017 and 2016 due to our net loss.
During the three months
ended March 31, 2017 and 2016, we incurred a net loss of $74 thousand (or $(0.04) per basic and diluted share) and $107 thousand
(or $(0.06) per basic and diluted share), respectively. The lower net loss was due to lower operating expenses. The basic weighted
average number of shares of common stock outstanding was 1,744,539 in the first quarter of both 2017 and 2016.
Liquidity and Capital Resources
Since our inception
and through March 31, 2017, we have incurred accumulated deficits of approximately $6.6 million. At March 31, 2017, we have
working capital of approximately $479 thousand. This represents a decrease of approximately $74 thousand from the working capital
of approximately $553 thousand at December 31, 2016. The decrease in working capital was primarily due to the net loss in the first
quarter of 2017.
As of March 31, 2017
and December 31, 2016, we have cash and cash equivalents of approximately $535 thousand and $614 thousand, respectively. The decrease
of approximately $79 thousand was due to the cash used in operations in the first quarter of 2017. We believe that the cash and
cash equivalents at March 31, 2017 should be sufficient to pay our operating expenses at least through May 15, 2018.
Although we do
not believe we will need to raise additional funds in order to meet the expenditures required for operating our business through
May 15, 2018, we may need to raise additional capital if we encounter unforeseen costs or if cash is needed for any corporate initiatives.
Although, currently we are not a party to any agreement with respect to potential investments in, or acquisitions of businesses,
we may enter into these types of arrangements in the future, which could also require us to seek additional equity or debt financing.
Additional funds may not be available on terms favorable to us or at all. We have begun evaluating strategic options including
the merger or acquisition of a new line of business or the sale or full liquidation of the Company. There can be no assurances
that we will enter into any such transactions, and if so, on terms favorable to us.
Discussion of Cash Flows
The Company’s
cash flow activity was as follows:
|
|
For the Three Months Ended
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
$
|
(79,449
|
)
|
|
$
|
(65,926
|
)
|
Net decrease in cash and cash equivalents
|
|
$
|
(79,449
|
)
|
|
$
|
(65,926
|
)
|
Cash Flows from Operating Activities
The net cash used in
operating activities of approximately $79 thousand in the first three months of 2017, principally represented cash used for operating
expenses. In the first three months of 2016, cash used in operating activities was approximately $66 thousand. The 2017 change
is primarily due to changes in current assets and current liabilities in the 2016 period offset in part by a lower net loss in
2017.
Cash Flows from Investing Activities
No cash was provided
by or used in investing activities in the three months ended March 31, 2017 and 2016.
Cash Flows from Financing Activities
No cash was provided
by or used in financing activities in the three months ended March 31, 2017 and 2016.
Off-Balance-Sheet Transactions
We are not party to
any off-balance-sheet transactions.
Contractual Commitments
We
are committed to pay Nano, a related party, $35 thousand in 2017 under the Amended Nano 2016 Agreement for
services performed as our chief executive officer. Further, we are committed to pay Brack, a related party, $25 thousand
during 2017 under the Amended Brack Agreement.
Item 3. Qualitative and Quantitative
Disclosures about Market Risk.
We are a smaller reporting
company and, therefore, we are not required to provide information required by this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls
and Procedures
We maintain disclosure
controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities
and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including
our Chief Financial Officer and Chief Executive Officer (Principal Executive Officer) and our President, as appropriate, to allow
timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance
of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment
in evaluating the cost-benefit relationship of possible controls and procedures.
As of March 31, 2017, we carried out an evaluation, under the
supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective in enabling us to record, process, summarize and report information
required to be included in our periodic filings with the Securities and Exchange Commission within the required time period.
Changes in Internal Control over
Financial Reporting
There have been no
changes in our internal controls over financial reporting that occurred during the quarter ended March 31, 2017 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.