Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of NZCH Corporation (the “Company,” “NZCH,” “we,” “us,” or “our”) should be read in conjunction with our unaudited condensed financial statements included elsewhere in this report and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2016
(the “Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2017. Certain statements we make under this Item 2 constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. See “Forward-Looking Statements” in “Part II — Other Information” of this report. You should consider our forward-looking statements in light of our unaudited condensed financial statements, related notes, and other financial information appearing elsewhere in this report, our Form 10-K and our other filings with the SEC.
Overview
The Company was incorporated in Nevada in 1999 for the purpose of creating and operating a global network of independently owned websites. HRG Group, Inc. (our “Principal Stockholder” or “HRG”) owns approximately 99.5% of our outstanding common stock. Currently, we have no business operations, other than complying with our reporting requirements under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). While it is possible that we may search for assets or businesses to acquire so that we may in the future become an operating company, we expect, although there can be no assurance, that we will wind-down our business, liquidate our operations and/or dissolve the Company. It is also possible that HRG may sell the Company or otherwise distribute its interest in the Company.
We have broad discretion in selecting a business strategy for the Company and there can be no assurance that we will be successful in implementing such a strategy. If we elect to pursue a business combination, we have broad discretion in identifying and selecting both the industries and the possible acquisition or business combination opportunities. We have not identified a specific industry to focus on, and have no present plans, proposals, arrangements or understandings with respect to a business combination or acquisition.
On April 14, 2017, HRG and Mr. Omar Asali, the Chief Executive Officer (“CEO”) and director of the Company, entered into a Separation and Release Agreement pursuant to which, among other things, Mr. Asali ceased his employment with the Company and resigned from the Board of Directors of the Company. On April 14, 2017, Mr. Joseph S. Steinberg, the CEO and Chairman of the Board of Directors of HRG, was appointed as Chairman of the Board of Directors and CEO of NZCH.
Results of Operations
For the three and
six months ended June 30, 2017
and
2016
, our operations consisted of the following:
Revenues.
We had no revenues for the three and
six months ended June 30, 2017
and
2016
, and we do not presently have any revenue-generating business.
Cost of Revenues
.
We had no cost of revenues for the three and
six months ended June 30, 2017
and
2016
.
General and Administrative Expenses
.
General and administrative expenses consist primarily of legal and accounting professional services, printing and filing costs, expenses allocated for services by our Principal Stockholder under a shared services agreement, and various other costs. General and administrative expenses
decreased
by
$5,062
to
$34,850
for the
three months ended June 30, 2017
from
$39,912
for the
three months ended June 30, 2016
primarily due to lower filing fees. General and administrative expenses
decreased
$21,734
to
$87,309
for the
six months ended June 30, 2017
from
$109,043
for the
six months ended June 30, 2016
primarily due to lower audit and filing fees.
Liquidity and Capital Resources
We have not generated any significant revenue since our inception. As a result, our primary source of liquidity has been from our initial capitalization.
Since our inception, we have utilized services of the management and staff and occupied office space of our Principal Stockholder under a shared services agreement that allocated these costs. Our Principal Stockholder has waived its rights under the shared services agreement to be reimbursed these costs through
June 30, 2017
. For the
three months ended June 30, 2017
and
2016
, we recorded approximately
$7,481
and
$9,859
, respectively, as contributed capital for these services and for the
six months ended June 30, 2017
and
2016
, we recorded approximately
$16,901
and
$19,970
, respectively.
As of
June 30, 2017
, our cash balance was
$788,677
and owned certain other intangible assets to which we ascribe no value. We believe that we have sufficient resources to satisfy our existing liabilities and our anticipated operating expenses for the next twelve months. Until such time as we actively pursue a business combination, asset acquisition or liquidate our operations, we expect these expenses to consist mainly of general and administrative expenses incurred in connection with maintaining our status as a public reporting company. We have no commitments for capital expenditures and foresee none, except for possible future business combinations, asset acquisitions or in connection with our liquidation and wind up. In order to effect a business combination, asset
acquisition or our liquidation and wind up, however, we may need additional financing. There is no assurance that any such financing will be available or available on terms favorable or acceptable to us.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements at
June 30, 2017
that have or are reasonably likely to have a current or future material effect on our financial position, results of operations or cash flows.
Summary of Cash Flows
Cash used in operating activities was
$52,213
for the
six months ended June 30, 2017
compared to
$82,344
for the
six months ended June 30, 2016
. The
decrease
in cash used in operating activities was primarily due to timing of payments on outstanding balances due to affiliates and third parties and lower general and administrative expenses as discussed above, during the
six months ended June 30, 2017
as compared to the
six months ended June 30, 2016
.
We had no cash flows related to investing activities for the
six months ended June 30, 2017
. Cash provided by investing activities was
$375,000
for the
six months ended June 30, 2016
related to the Domain Sale during the
six months ended June 30, 2016
.
We had no cash flows related to financing activities for the
six months ended June 30, 2017
and
2016
.
Recent Accounting Pronouncements Not Yet Adopted
There were no relevant recent accounting pronouncements not yet adopted at
June 30, 2017
.
Critical Accounting Policies and Estimates
As of
June 30, 2017
, our critical accounting policies and estimates have not changed materially from those set forth in our Form 10-K.
Contractual Obligations
We do not have any long-term debt obligations, capital leases obligations, operating lease obligations or purchase obligations at
June 30, 2017
.
Item 4.
Controls and Procedures
Evaluation of disclosure controls and procedures
An evaluation was performed under the supervision of the Company’s management, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Company’s management, including the Principal Executive Officer and Principal Financial Officer, concluded that, as of
June 30, 2017
, the Company’s disclosure controls and procedures were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to the Company’s management, including the Company’s Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Notwithstanding the foregoing, there can be no assurance that the Company’s disclosure controls and procedures will detect or uncover all failures of persons within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable, not absolute, assurance of achieving their control objectives.
Changes in Internal Controls Over Financial Reporting
An evaluation was performed under the supervision of the Company’s management, including the Principal Executive Officer and Principal Financial Officer, of whether any change in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) occurred during the quarter ended
June 30, 2017
. Based on that evaluation, the Company’s management, including the Principal Executive Officer and Principal Financial Officer, concluded that no significant
changes in the Company’s internal controls over financial reporting occurred during the quarter ended
June 30, 2017
that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Limitations on the Effectiveness of Controls
Our management, including our Principal Executive Officer and Principal Financial Officer, does not expect that the Company’s disclosure controls and procedures or the Company’s internal controls over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.