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, 2019, 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 $.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 effected 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. None of the Series A Preferred Stock were outstanding
as of the Series A Preferred Elimination Date.
In
December 2008, we sold 550,000 shares of restricted Common Stock to our Chief Financial Officer, for $2,000. The issuance of these
shares was exempt from registration pursuant to Sections 4(2) and 4(6) or the Securities Act of 1933, as amended (the “Act”).
The stock certificate representing these shares was imprinted with a legend restricting transfer unless pursuant to an effective
registration statement or an exemption from registration under the Act.
On
May 6, 2013, Ironbound Partners Fund, LLC (“Ironbound”) acquired 9,509,440 shares of our outstanding Common Stock
(the “Acquired Shares”) for an aggregate purchase price of $15,000, or $0.00157737 per share, 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 constituted all the shares of Common Stock previously owned by R&R,
an affiliate of Rodman, and represented 69.1% of our total issued and outstanding shares of Common Stock as of May 6, 2013.
On
May 14, 2013, Ironbound loaned $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 was initially issued with a two-year term and bore interest
at the rate of 5.0% per annum, payable at maturity. The principal and accrued interest on the May 2013 Note was 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). The May 2013 Note was amended in July 2014 in accordance with
the Amended and Restated Note, as described below.
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
has a maturity date of August 31, 2015 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” and
together with the 2014 Note, the “Prior Notes”) 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 and provided
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 remained 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 to us an additional $10,000. This amount was subsequently evidenced by a promissory note
(the “December 2015 Note”) with the same terms as the Prior Notes. The proceeds of the December 2015 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 April 2016 Note has the same terms as the Prior Notes. The proceeds of the April 2016 Note was 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. 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 dates of the outstanding promissory notes held by Ironbound 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 December 2015 Note, 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 dates of the outstanding promissory notes held by Ironbound was extended from August 31, 2017
to August 31, 2018.
In
August 2018, the maturity dates of the outstanding promissory notes held by Ironcound was extended from August 1, 2018 to August
31, 2019.
On
August 27, 2018, we issued a convertible promissory note (the “August 2018 Note”) in the principal amount of $15,000
to Ironbound. The August 2018 Note has a maturity date of August 31, 2019 and bears interest at the rate of 5.0% per annum, payable
at maturity. The principal and accrued interest on the August 2018 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 August 2018 Note), or
upon the consummation of a “Fundamental Transaction” (as defined in the August 2018 Note) at the “Conversion
Price” (as defined in the August 2018 Note). The proceeds of the August 2018 Note has been and will be utilized by the Company
to fund working capital needs.
On
December 4, 2018, we issued a convertible promissory note (the “December 2018 Note”) in the principal amount of $25,000
to Ironbound. The December 2018 Note has a maturity date of August 31, 2019 and bears interest at the rate of 5.0% per annum,
payable at maturity. The principal and accrued interest on the December 2018 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 December 2018 Note), or upon the consummation of a “Fundamental Transaction” (as defined in the December 2018
Note) at the “Conversion Price” (as defined in the December 2018 Note). The proceeds of the December 2018 Note has
been and will be utilized by the Company to fund working capital needs.
Effective
November 12, 2019, the maturity dates of the outstanding promissory notes held by Ironound was extended from August 31, 2019 to
August 31, 2020.
On
November 27, 2019, we issued a convertible promissory note (the “November 2019 Note”) in the principal amount of $40,000
to Ironbound. The November 2019 Note has a maturity date of August 31, 2020 and bears interest at the rate of 5.0% per annum,
payable at maturity. The principal and accrued interest on the November 2019 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 November 2019 Note), or upon the consummation of a “Fundamental Transaction” (as defined in the November 2019
Note) at the “Conversion Price” (as defined in the November 2019 Note). The proceeds of the November 2019 Note has
been and will be utilized by the Company to fund working capital needs.
As
of December 31, 2019, 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, 2019 COMPARED TO THE THREE MONTH PERIOD ENDED DECEMBER 31, 2018
We
are a corporation with limited operations and did not have any revenues during the three month periods ended December 31, 2019
and 2018, respectively.
Total
expenses from continuing operations for the three months ended December 31, 2019 and 2018 were $12,092 and $13,389, 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, 2019 COMPARED TO THE NINE MONTH PERIOD ENDED DECEMBER 31, 2018
We
are a corporation with limited operations and did not have any revenues during the nine month periods ended December 31, 2019
and 2018, respectively.
Total
expenses from continuing operations for the nine months ended December 31, 2019 and 2018 were $45,752 and $38,470, 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, 2019, 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, 2019, we had the Outstanding Notes, the August 2018 Note, the December 2018 Note and the November 2019 Note payable
in the aggregate principal amount of $347,000 payable to Ironbound, our majority stockholder. We had cash and cash equivalents
of $19,083 and negative working capital of $397,246. 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
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations
by recognizing a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.
Leases will be classified as either operating or financing, with such classification affecting the pattern of expense recognition
in the income statement. ASU 2016-02 is effective for fiscal years and interim periods within those years beginning after December
15, 2018, and early adoption is permitted. The adoption of ASU 2016-02 did not have material impact on our financial statements.
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, 2019.
Off-Balance
Sheet Arrangements
As
of December 31, 2019, 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.