ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Use of Forward-Looking Statements
Some of the statements in this Form 10-Q,
including some statements in “Management’s Discussion and Analysis or Plan of Operation” are forward-looking
statements about what may happen in the future. They include statements regarding our current beliefs, goals, and expectations
about matters such as our expected financial position and operating results, our business strategy, and our financing plans. These
statements can sometimes be identified by our use of forward-looking words such as “anticipate,” “estimate,”
“expect,” “intend,” “may,” “will,” and similar expressions. We cannot guarantee
that our forward-looking statements will turn out to be correct or that our beliefs and goals will not change. Our actual results
could be very different from and worse than our expectations for various reasons. You are urged to carefully consider these factors,
as well as other information contained in this Form 10-Q and in our other periodic reports and documents filed with the United
States Securities and Exchange Commission (“SEC”).
In our Form 10-K filed with the SEC for
the year ended March 31, 2017, we have identified critical accounting policies and estimates for our business.
Plan of Operation
We are a corporation with limited operations
and have very limited revenues from our business operations since our incorporation in September 2005. Until December 31, 2007,
we held the exclusive license to exploit the Dreesen’s Donut Brand in the United States with the exception of the states
of Florida and Pennsylvania, and in Suffolk County, New York, which Dreesen retained for itself. The license from Dreesen expired
on December 31, 2007.
On August 8, 2007 (the “Effective
Date”), we entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Moyo Partners, LLC, a New
York limited liability company (“Moyo”) and R&R Biotech Partners, LLC, a Delaware limited liability company (“R&R”
collectively with Moyo, the “Purchasers”), pursuant to which we sold to them, in the aggregate, approximately, four
million four hundred seventy nine thousand two hundred fifty (4,479,250) shares of our common stock, par value $0.001 per share
(“Common Stock”) and five hundred (500
)
shares of our Series A Preferred Stock, par value $.001 per share (“Series
A Preferred Stock”), each share convertible at the option of the holder into, approximately, fourteen thousand eight hundred
twenty (14,820) shares of Common Stock, for aggregate gross proceeds to us of $600,000. The shares of Series A Preferred Stock
were convertible only to the extent there were a sufficient number of shares of Common Stock available for issuance upon any such
conversion.
On the Effective Date: (i) the Purchasers
acquired control of Newtown, with (a) R&R acquiring nine million five hundred nine thousand four hundred forty (9,509,440)
shares of Common Stock (assuming the conversion by R&R of the four hundred (400) shares of Series A Preferred Stock it acquired
pursuant to the Purchase Agreement into five million nine hundred twenty eight thousand (5,928,000) shares of Common Stock) constituting
72% of the then issued and outstanding shares of Common Stock, and (b) Moyo acquiring two million three hundred seventy seven thousand
three hundred sixty (2,377,360) shares of Common Stock (assuming the conversion by Moyo of its one hundred (100) shares of Series
A Preferred Stock it acquired pursuant to the Purchase Agreement into one million four hundred eighty one thousand five hundred
ten (1,481,510) shares of Common Stock) constituting 18% of the then issued and outstanding shares of Common Stock; and (ii) in
full satisfaction of our obligations under outstanding convertible promissory notes in the principal amount of $960,000 (the “December
Notes”), the Note holders of the December Notes converted an aggregate of $479,811 of principal and accrued interest into
274,200 shares of Common Stock and accepted a cash payment from us in the aggregate amount of $625,030 for the remaining principal
balance.
On the Effective Date: (i) Arnold P. Kling
was appointed to our Board of Directors (“Board”) and served together with Vincent J. McGill, a then current director
who continued to serve until August 20, 2007, the effective date of his resignation from our Board; (ii) all of our then officers
and directors, with the exception of Mr. McGill, resigned from their respective positions with us; (iii) our Board appointed Mr.
Kling as president and Kirk M. Warshaw as chief financial officer and secretary; and (iv) we relocated our headquarters to Chatham,
New Jersey.
Following Mr. McGill’s resignation
from our Board on August 20, 2007, Mr. Kling became our sole director and president.
On October 19, 2007, we put into effect
an amendment to our Certificate of Incorporation to increase to 100,000,000 the number of authorized shares of Common Stock available
for issuance (the “Charter Amendment”). As a result of the Charter Amendment, as of October 19, 2007, we had adequate
shares of Common Stock available for issuance upon the conversion of all the issued and outstanding shares of Series A Preferred
Stock.
On December 19, 2007, the holders of all
the issued and outstanding shares of Series A Preferred Stock elected to convert all of their shares into shares of Common Stock.
As a result, the 500 shares of Series A Preferred Stock outstanding were exchanged for 7,407,540 shares of Common Stock, and all
500 shares of the Series A Preferred Stock were returned to the status of authorized and unissued shares of undesignated preferred
stock, par value $.001 per shares.
On August 15, 2008 (the “Series A
Preferred Elimination Date”), all 500 shares of the Series A Preferred Stock were returned to the status of authorized and
unissued shares of undesignated preferred stock, par value $0.001 per shares. None of the Series A Preferred Stock were outstanding
as of the Series A Preferred Elimination Date.
On August 29, 2008 (the “Reverse
Split Effective Date”), we implemented a 1 for 50 reverse stock split (the “Reverse Split”) of the Common Stock.
Pursuant to the Reverse Split, each 50 shares of Common Stock issued and outstanding as of the Reverse Split Effective Date was
converted into one (1) share of Common Stock. All share and per share data herein has been retroactively restated to reflect the
Reverse Split.
In December 2008, we sold 550,000 shares
of Common Stock to Kirk Warshaw, our CFO, for $2,000. We determined such shares were issued below their fair value; hence $11,750
of compensation expense was recorded for the difference in value of the shares issued for cash versus fair value of such shares.
On May 6, 2013, Ironbound Partners Fund,
LLC (“Ironbound”) acquired 9,509,440 shares of Common Stock (the “Acquired Shares”) for an aggregate purchase
price of $15,000, or $0.00157737 per share. The Acquired Shares represent 69.1% of our total issued and outstanding shares of Common
Stock. The Acquired Shares were purchased by Ironbound, utilizing its available and uncommitted cash, from the Chapter 7 Trustee
of the Estates of Rodman & Renshaw, LLC (“Rodman”), Direct Markets, Inc., and Direct Markets Holdings, Corp. in
Chapter 7 bankruptcy proceedings pending in the United States Bankruptcy Court for the Southern District of New York (Cases No.
13-10087, 13-10088 and 13-10089). The Acquired Shares constitute all the shares of Common Stock previously owned by R&R, an
affiliate of Rodman.
On May 14, 2013, Ironbound loan $100,000
to us and we issued a convertible promissory note in the principal amount of $100,000 to Ironbound (the “May 2013 Note”).
The May 2013 Note is for a two-year term and bears interest at the rate of 5.0% per annum, payable at maturity. The principal and
accrued interest on the May 2013 Note is convertible into shares of Common Stock upon the consummation of a “Fundamental
Transaction” (as defined in the May 2013 Note) at the “Conversion Price” (as defined in the May 2013 Note).
On August 15, 2013, we declared a stock
dividend on our outstanding Common Stock for stockholders of record as of August 15, 2013 (the “Record Date”). As a
result, all stockholders on the Record Date received nine new shares of Common Stock for each share of Common Stock owned by them
as of the that date (the “2013 Stock Dividend”). All share and per share data herein has been retroactively restated
to reflect the Reverse Split and the 2013 Stock Dividend, since the 2013 Stock Dividend was in substance a forward stock split.
On July 25, 2014, we raised gross proceeds
of $72,000 in a debt financing transaction with Ironbound and, in connection therewith, issued to Ironbound a convertible promissory
note (the “2014 Note”) in the principal amount of $72,000. The 2014 Note had a maturity date of August 31, 2015 (amended
as described below) and bears interest at the rate of 5.0% per annum, payable at maturity. The principal and accrued interest on
the 2014 Note is convertible, at the election of Ironbound, into shares of our common stock following the consummation of a “Qualified
Financing” (as defined in the 2014 Note), or upon the consummation of a “Fundamental Transaction” (as defined
in the 2014 Note) at the “Conversion Price” (as defined in the 2014 Note).
Further, on July 25, 2014, we issued an
amended and restated convertible promissory note (the “Amended and Restated Note”) to Ironbound in the principal amount
of $100,000, in substitution for the May 2013 Note. The Amended and Restated Note extended the maturity of the May 2013 Note to
August 31, 2015 (amended as described below) and provides for the principal and accrued interest on the May 2013 Note to be convertible,
at the election of Ironbound, into shares of our common stock following the consummation of a “Qualified Financing”
(as defined in the May 2013 Note), or upon the consummation of a “Fundamental Transaction” (as defined in the May 2013
Note) at the “Conversion Price” (as defined in the May 2013 Note). The May 2013 Note otherwise remains unchanged.
Effective September 1, 2015, the maturity
dates of the Prior Notes was extended from August 31, 2015 to August 31, 2016.
On October 30, 2015, Mr. Kling resigned
from his position as our sole director and from his position as our President. Also on October 30, 2015, Mr. Warshaw resigned from
his positions as our Chief Financial Officer and Secretary. Messrs. Kling’s and Warshaw’s resignation were not due
to any disagreement with the Company or its management on any matter relating to the Company’s operations, policies or practices.
Prior to Mr. Kling’s resignation, our Board of Directors appointed Jonathan J. Ledecky, the managing member of Ironbound,
our largest stockholder, to fill the vacancy created by Mr. Kling’s resignation and will assume the role of President of
the Company.
On December 31, 2015, Ironbound advanced
us an additional $10,000. This amount was subsequently evidenced by a promissory note with the same terms as the Prior Notes. The
proceeds of this note was utilized by the Company to fund working capital needs.
On April 1, 2016, we issued a convertible
promissory note (the “April 2016 Note”) in the principal amount of $10,000 to Ironbound. The 2016 Note has the same
terms as the Prior Notes. The proceeds of the 2016 Note was and will be utilized by the Company to fund working capital needs.
On July 15, 2016, we issued a convertible
promissory note (the “July 2016 Note”) in the principal amount of $25,000 to Ironbound Partners Fund, LLC. The July
2016 Note has a maturity date of August 31, 2017 and bears interest at the rate of 5.0% per annum, payable at maturity. The principal
and accrued interest on the July 2016 Note is convertible, at the election of Ironbound, into shares of the Company’s common
stock following the consummation of a “Qualified Financing” (as defined in the July 2016 Note), or upon the consummation
of a “Fundamental Transaction” (as defined in the July 2016 Note) at the “Conversion Price” (as defined
in the July 2016 Note). The proceeds of the July 2016 Note will be utilized by the Company to fund working capital needs.
Effective September 1, 2016, the maturity
date of the outstanding notes at such date was extended from August 31, 2016 to August 31, 2017.
On February 14, 2017, we issued a convertible
promissory note (the “February 2017 Note” and together with the Prior Notes, the April 2016 Note and the July 2016
Note, the “Outstanding Notes”) in the principal amount of $50,000 to Ironbound. The February 2017 Note has a maturity
date of August 31, 2017 and bears interest at the rate of 5.0% per annum, payable at maturity. The principal and accrued interest
on the February 2017 Note is convertible, at the election of Ironbound, into shares of our common stock following the consummation
of a “Qualified Financing” (as defined in the February 2017 Note), or upon the consummation of a “Fundamental
Transaction” (as defined in the February 2017 Note) at the “Conversion Price” (as defined in the February 2017
Note). The proceeds of the February 2017 Note will be utilized by the Company to fund working capital needs.
Effective September 1, 2017, the maturity
date of the Outstanding Notes was extended from August 31, 2016 to August 31, 2018.
As of December 31, 2017, our authorized
capital stock consisted of 100,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock of which 13,757,550 shares
of Common Stock, and no shares of Preferred Stock, were issued and outstanding. All shares of Common Stock currently outstanding
are validly issued, fully paid and non-assessable.
As of the Effective Date, we discontinued
our efforts to promote the Dreesen’s Donut Brand, we have no employees and our main purpose has been to effect a business
combination with an operating business which we believe has significant growth potential. As of yet, we have no definitive agreements
or understandings with any prospective business combination candidates and there are no assurances that we will find a suitable
business with which to combine. The implementation of our business objectives is wholly contingent upon a business combination
and/or the successful sale of our securities. We intend to utilize the proceeds of any offering, any sales of equity securities
or debt securities, bank and other borrowings or a combination of those sources to effect a business combination with a target
business which we believe has significant growth potential. While we may, under certain circumstances, seek to effect business
combinations with more than one target business, unless and until additional financing is obtained, we will not have sufficient
proceeds remaining after an initial business combination to undertake additional business combinations.
A common reason for a target company to
enter into a merger with us is the desire to establish a public trading market for its shares. Such a company would hope to avoid
the perceived adverse consequences of undertaking a public offering itself, such as the time delays and significant expenses incurred
to comply with the various Federal and state securities law that regulate initial public offerings.
As a result of our limited resources, we
expect to have sufficient proceeds to effect only a single business combination. Accordingly, the prospects for our success will
be entirely dependent upon the future performance of a single business. Unlike certain entities that have the resources to consummate
several business combinations or entities operating in multiple industries or multiple segments of a single industry, we will not
have the resources to diversify our operations or benefit from the possible spreading of risks or offsetting of losses. A target
business may be dependent upon the development or market acceptance of a single or limited number of products, processes or services,
in which case there will be an even higher risk that the target business will not prove to be commercially viable.
Our officers are only required to devote
a small portion of their time (less than 10%) to our affairs on a part-time or as-needed basis. We expect to use outside consultants,
advisors, attorneys and accountants as necessary. We do not anticipate hiring any full-time employees so long as we are seeking
and evaluating business opportunities.
We expect our present management to play
no managerial role in our company following a business combination. Although we intend to scrutinize closely the management of
a prospective target business in connection with our evaluation of a business combination with a target business, our assessment
of management may be incorrect. We cannot assure you that we will find a suitable business with which to combine.
Our principal business objective for the
next 12 months and beyond such time will be to achieve long-term growth potential through a combination with an operating business.
We will not restrict our potential candidate target companies to any specific business, industry or geographical location and,
thus, may acquire any type of business. The analysis of new business opportunities will be undertaken by or under the supervision
of our officers and directors.
Results of Operations
THREE MONTH PERIOD ENDED DECEMBER 31, 2017 COMPARED TO THE
THREE MONTH PERIOD ENDED DECEMBER 31, 2016
We are a corporation with limited operations
and did not have any revenues during the three month periods ended December 31, 2017 and 2016, respectively.
Total expenses from continuing operations
for the three months ended December 31, 2017 and 2016 were $10,488 and $9,433, respectively. The majority of these expenses primarily
constituted general and administrative expenses related to accounting and compliance with the Securities Exchange Act of 1934,
as amended (“Exchange Act”).
NINE MONTH PERIOD ENDED DECEMBER 31, 2017 COMPARED TO THE
NINE MONTH PERIOD ENDED DECEMBER 31, 2016
We are a corporation with limited operations
and did not have any revenues during the nine month periods ended December 31, 2017 and 2016, respectively.
Total expenses from continuing operations
for the nine months ended December 31, 2017 and 2016 were $43,849 and $44,486, respectively. The majority of these expenses primarily
constituted general and administrative expenses related to accounting and compliance with the Securities Exchange Act of 1934,
as amended (“Exchange Act”).
Liquidity and Capital Resources
At December 31, 2017, we did not have any
revenues from operations. Absent a merger or other combination with an operating company, we do not expect to have any revenues
from operations. No assurance can be given that such a merger or other combination will occur or that we can engage in any public
or private sales of our equity or debt securities to raise working capital. We are dependent upon future loans or capital contributions
from our present stockholders and/or management and there can be no assurances that our present stockholders or management will
make any loans or capital contributions to us.
At December 31, 2017, we had the Outstanding
Notes payable in the aggregate principal amount of $267,000 payable to Ironbound, our majority stockholder. We had cash and cash
equivalents of $8,459 and negative working capital of $298,170. Such funds will not be sufficient to satisfy our cash requirements
during the next twelve months and we will require additional funds. We cannot provide assurance that adequate additional funds
will be available or, if available, will be offered on acceptable terms.
Our present material commitments are professional
and administrative fees and expenses associated with the preparation of our filings with the SEC and other regulatory requirements.
In the event that we engage in any merger or other combination with an operating company, we will have additional material professional
commitments.
Critical Accounting Policies
Our unaudited financial statements are
prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which
require management to make estimates and assumptions that affect the amounts reported in such financial statements and related
notes. Actual results can and will differ from estimates. These differences could be material to the financial statements. We believe
our application of accounting policies and the estimates required therein are reasonable. Outlined below are those policies considered
particularly significant.
Use of Estimates
In preparing financial statements in accordance
with GAAP, management makes certain estimates and assumptions, where applicable, that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. While actual results could differ from those estimates, management
does not expect such variances, if any, to have a material effect on the financial statements.
Income Taxes
The asset and liability method is used
in accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for operating loss and tax
credit carry forwards and for the future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases. 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 the results of operations
in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax
assets unless it is more likely than not that such assets will be realized.
Financial Instruments
The estimated fair values of all reported
assets and liabilities which represent financial instruments, none of which are held for trading purposes, approximate their carrying
value because of the short term maturity of these instruments or the stated interest rates are indicative of market interest rates.
Equity Based Compensation
The accounting guidance for “Share
Based Payments” requires the recognition of the fair value of employee stock options and similar awards and applies to all
outstanding and vested stock-based awards. In computing the impact, the fair value of each option is estimated on the date of grant
based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk free interest rate; volatility; and expected
remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management’s
best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if
factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.
In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest.
In estimating our forfeiture rate, we analyzed its historical forfeiture rate, the remaining lives of unvested options, and the
amount of vested options as a percentage of total options outstanding. If our actual forfeiture rate is materially different from
its estimate, or if we reevaluate the forfeiture rate in the future, the stock-based compensation expense could be significantly
different from what we have recorded in the current period. The last equity based compensation issued by us was more than two years
ago and such shares were fully vested upon issuance, hence an expense was recorded at that time.
New Accounting Pronouncements
In August 2014, the FASB issued ASU 2014-15
on “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s
Ability to Continue as a Going Concern”. Currently, there is no guidance in GAAP about management’s responsibility
to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related
footnote disclosures. The amendments in this ASU provide that guidance. In doing so, the amendments are intended to reduce diversity
in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue
as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically,
the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including
interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain
disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express
statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year
after the date that the financial statements are issued (or available to be issued). The amendments in this ASU are effective for
public and nonpublic entities for annual periods ending after December 15, 2016. Early adoption is permitted.
All other new accounting pronouncements
issued but not yet effective have been reviewed and determined to be not applicable. As a result, the adoption of such new accounting
pronouncements, when effective, is not expected to have a material impact on our financial position.
Commitments
We do not have any commitments which are
required to be disclosed in tabular form as of December 31, 2017.
Off-Balance Sheet Arrangements
As of December 31, 2017, we have no off-balance
sheet arrangements such as guarantees, retained or contingent interest in assets transferred, obligation under a derivative instrument
and obligation arising out of or a variable interest in an unconsolidated entity.