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 discusses the operating results and financial condition of the Company for the fiscal quarters ended June 30, 2021 and 2020. The discussion and analysis set forth below is intended to assist you in understanding the financial condition and results of our operations and should be read in conjunction with our financial statements and the accompanying notes included elsewhere in this quarterly report. Our results of operations and financial condition, as reflected in the accompanying statements and related notes, are subject to management's evaluation and interpretations of business conditions, changing market conditions and other factors. Historical results and trends which might appear should not be taken as indicative of future operations. The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of various factors, including those discussed in our Form 10-K for the fiscal year ended September 30, 2020.
A NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (including the exhibits hereto) contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), such as statements relating to our financial condition, results of operations, plans, objectives, future performance or expectations, and business operations. These statements relate to expectations concerning matters that are not historical fact. Accordingly, statements that are based on management's projections, estimates, assumptions, and judgments constitute forward-looking statements. These forward-looking statements are typically identified by words or phrases such as "believe," "expect," "anticipate," "plan," "estimate," "approximately," "intend," "objective," "goal," "project," and other similar words and expressions, or future or conditional verbs such as "will," "should," "would," "could," and "may." These forward-looking statements are based largely on information currently available to our management and on our current expectations, assumptions, plans, estimates, judgments and projections about our business and our industry, and such statements involve inherent risks and uncertainties. Although we believe our expectations are based on reasonable estimates and assumptions, they are not guarantees of performance and there are a number of known and unknown risks, uncertainties, contingencies, and other factors (many of which are outside our control) which may cause actual results, performance, or achievements to differ materially from those expressed or implied by such forward-looking statements. Accordingly, there is no assurance that our expectations will in fact occur or that our estimates or assumptions will be correct, and we caution investors and all others not to place undue reliance on such forward-looking statements.
These potential risks and uncertainties include, but are not limited to, our ability to identify, secure and obtain suitable and sufficient financing to continue as a going concern; our ability to identify, enter into and close an appropriate merger, acquisition, or other combination transaction with a business prospect; economic, political and market conditions; the general scrutiny and limitations placed on "blank check" and "shell" companies under applicable governmental regulatory oversight; interest rate risk; government and industry regulation that might affect future operations; potential change of control transactions resulting from merger, acquisition, or combination with a business prospect; the potential dilution in our equity (both economically and in voting power) that might result from future financing or from merger, acquisition, or combination activities; and other factors.
All written or oral forward-looking statements that are made or attributable to us are expressly qualified in their entirety by this cautionary notice. The forward-looking statements included herein are only made as of the date of this Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2021 (this "Form 10-Q"). We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Overview
Operations. Following the reactivation of our reporting obligations under Section 15(d) of the Exchange Act on December 17, 2014 ("Reporting Reactivation") which had been suspended since 2011, we attempted to seek to maximize shareholder value by searching for and identifying suitable potential target private companies or business partners for a business combination that met the Company's strategic objectives. Although the Company had held preliminary discussions regarding potential business combination transactions, the Company ultimately was unable to successfully identify a suitable candidate or negotiate the terms of any such business combination and, as of the fiscal year ended September 30, 2016, the Company had expended substantially all of its available cash and had not been able to secure any additional funds to finance its continued operations. As a result, the Company was unable to prepare and timely file its periodic reports under the Exchange Act, commencing with its Annual Report on Form 10-K for the fiscal year ended September 30, 2016 and, other than maintaining its corporate status, was dormant from such date through May 2020.
In May 2020, the Company determined that the business environment had sufficiently changed so that identifying a target and completing a business combination may be more likely than was previously the case. As part of this strategy, the Company determined to attempt to seek the financing necessary to prepare and file all of its delinquent Forms 10-K under the Exchange Act and to again aggressively pursue an acquisition target. In order for the Company to finance the preparation and filing of the Company's delinquent periodic report filings with the Commission, Mr. Toomey, a principal shareholder, director and secretary of the Company, loaned the Company approximately $130,000 during the fiscal year ended 2020 and the first quarter of the 2021 fiscal year ("Toomey Loans").
Our plan is to seek a business venture in which to participate. The selection of a business opportunity in which to participate is complex and extremely risky and will be made by management in the exercise of its business judgment. No assurance can be given that we will be able to identify a suitable target or, if identified, that we will be able to successfully negotiate and agree upon terms acceptable to the Company or to successfully complete and close the proposed acquisition or business combination. No specific assets or businesses have yet been identified. Further, there is no certainty that any such assets or business will be identified or any transactions will be consummated.
We expect to pursue our search for a business opportunity primarily through our officers and directors, although other sources, such as professional advisors, securities broker-dealers, venture capitalists, members of the financial community, and others, may present unsolicited proposals. Our activities are subject to several significant risks that arise primarily as a result of the fact that we have no specific target company or business and may acquire or participate in a business opportunity based on the decision of management which will, in all probability, act without the consent, vote, or approval of our shareholders. A description of the manner in which we will pursue the search for and participation in a business venture is described in "Recent Business Activities" below.
Financial Condition. We did not record revenues from operations during the fiscal quarter covered by our financial statements included in this Form 10-Q and are not currently engaged in any business activities that provide cash flows. We do not expect to generate any revenues during the current fiscal year unless we are able to secure additional financing to continue operations. Our ability to continue as a going concern is dependent upon our ability to develop additional sources of capital, locate and complete a merger with another company, and ultimately, achieve profitable operations.
We have no specific plans, understandings or agreements with respect to the raising of such funds, and we may seek to raise the required capital by the issuance of equity or debt securities or by other means. Since we have no such arrangements or plans currently in effect, our inability to raise funds for the consummation of an acquisition may have a severe negative impact on our ability to become a viable company.
We have negative working capital, negative shareholders' equity and have not earned any revenues from operations since the fiscal year ended September 30, 2011. Because we have had no revenues from operations and do not own any significant assets against which we can borrow funds, we historically had relied on funds furnished by Mr. Toomey, a principal shareholder, director and secretary of the Company, in exchange for issuances of our convertible debt securities in order to finance our operations following our Reporting Reactivation. However, Mr. Toomey previously advised the Company that he did not intend to provide the Company with any further loans or equity financing after September 30, 2016 if the Company was unable to enter into a letter of intent or receive a formal offer to engage in a bona fide business combination with a target company or business operation on or before such date. As a result of our inability to satisfy these requirements, Mr. Toomey ceased financing our operations.
However, following our determination that the business environment was more favorable to pursue our strategy, Mr. Toomey again provided us with nonconvertible loans in 2020 to recommence our operations.
In order to fund our operations and proposed business activities through such time as we may consummate a merger or other business combination with a target company or business operation, we will need to continue to raise the required capital through the issuance of equity or debt securities or by other means. Although Mr. Toomey has provided us with additional debt financing since May 2020, we have no formal commitment that Mr. Toomey will continue to provide the Company with working capital sufficient until we consummate a merger or other business combination with a target company or business operation, and we anticipate that his willingness to provide additional financing will be dependent on our ability to demonstrate meaningful progress with our business strategy.
Our ability to continue as a going concern is dependent upon our ability to develop additional sources of capital, locate and complete a merger with another company, and ultimately, achieve profitable operations. Except as described in "Recent Business Activities" below, we have no specific plans, understandings or agreements with respect to the raising of any additional financings, and we may seek to raise the required capital by the issuance of equity or debt securities or by other means. Since we have no such arrangements or plans currently in effect (other than as described in "Recent Business Activities" below), our limited ability to raise funds to continue operations and to seek an acquisition may have a severely negative impact on our ability to become a viable company. Our historical operating results disclosed in this Form 10-Q are not meaningful to our future results.
Results of Operations
Comparison of Three Months Ended June 30, 2021 and 2020
Revenues. Because we currently do not have any business operations, we have not had any revenues during the three months ended June 30, 2021 and June 30, 2020.
General and Administrative Expenses. We had operating expenses of $4,025 and $3,625 for the three months ended June 30, 2021 and June 30, 2020, respectively. The expenses during the three month period ended June 30, 2021 and June 30, 2020 primarily consisted of payments associated with maintaining our corporate status. The increase in such expenses for the three months ended June 30, 2021 as compared to the same period ended June 30, 2020 was due to accrued interest and professional fees associated with preparing our delinquents SEC reports on Forms 10-K and preparation of current Forms 10-Q.
Net Income (Loss). We incurred net losses for the three months ended June 30, 2021 and June 30, 2020 of $4,025 and $3,625, respectively. The increase in net loss was due to our increased General and Administrative expenses during the current fiscal year.
Comparison of Nine Months Ended June 30, 2021 and 2020
Revenues. Because we currently do not have any business operations, we have not had any revenues during the nine months ended June 30, 2021 and June 30, 2020.
General and Administrative Expenses. We had operating expenses of $57,182 and $6,315 for the nine months ended June 30, 2021 and June 30, 2020, respectively. The expenses during the nine-month period ended June 30, 2021 and June 30, 2020 primarily consisted of payments associated with maintaining our corporate status. The increase in such expenses for the nine months ended June 30, 2021 as compared to the same period ended June 30, 2020 was due to professional fees associated with preparing our delinquent SEC reports on Forms 10-K and preparation of current Forms 10-Q.
Net Income (Loss). We incurred net losses for the nine months ended June 30, 2021 and June 30, 2020 of $57,182 and $6,315, respectively. The increase in net loss was due to our increased General and Administrative expenses during the current fiscal year.
Liquidity and Capital Resources
As of June 30, 2021, the Company had limited cash resources and we had a working capital deficit of $272,570. Our current liabilities were $348,416 at June 30, 2021 and $218,442 at September 30, 2020, respectively. Our total assets increased from $3,054 at September 30, 2020 to $75,846 at June 30, 2021 due to advances from related parties and a decrease in cash to pay certain costs associated with maintaining our corporate status, payment of professional fees associated with preparing our delinquent SEC reports on Forms 10-K and preparation of current Forms 10-Q during the nine month period ended June 30, 2021.
We had no material commitments for capital expenditures as of June 30, 2021. However, if we are able to execute our business plan as anticipated in the future, we would likely incur substantial capital expenditures and require additional financing to fund such expenditures.
In order for the Company to finance the preparation and filing of all of the Company's delinquent Forms 10-K for filing with the Commission, Mr. Toomey made the following cash advances and loans to the Company in an aggregate amount of $130,000 during the 2020 calendar year (the "Toomey Loans"):
| • | On May 5, 2020, a cash advance of $5,000 in principal amount (described above); |
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| • | On October 19, 2020, a cash advance of $25,000 in principal amount; and |
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| • | On December 21, 2020, a cash advance of $100,000 in principal amount. |
The Toomey Loans are evidenced by a consolidated promissory note, dated February 1, 2021, issued by the Company to Mr. Toomey (the "2021 Promissory Note"). The 2021 Promissory Note bears interest, commencing on the date of the loan, at an initial rate of 2% per annum and the note matures on December 31, 2023. The maturity date of the 2021 Promissory Note will accelerate and be due and payable immediately upon any change of control, merger, or other business combination (as defined in the 2021 Promissory Note). If the maturity date is extended for any reason whatsoever (including in connection with an acceleration event), the 2021 Promissory Note will bear interest at a rate of 5% per annum, commencing on the date of any such extension. The 2021 Promissory Note is not convertible into our common shares.
These funds were used to pay for the Company's ongoing business operations, consisting primarily of payments associated with maintaining our corporate status and professional fees associated with preparing our delinquent periodic reports under the Exchange Act.
Because we do not have any revenues from operations, absent a merger or other business combination with an operating company or a public or private sale of our equity or debt securities, the occurrence of either of which cannot be assured, we were dependent upon future loans or equity investments from our present shareholders or management to fund operating shortfalls and do not foresee a change in this situation in the immediate future. We will attempt to raise capital for our current operational needs through loans from related parties, debt financing, equity financing, or a combination of financing options. However, we did not raise capital or secure any additional loans to finance for our operational needs during the fiscal quarter ended June 30, 2021.
Although Mr. Toomey has provided the necessary funds for the Company from time to time in the past, there is no existing commitment to provide additional capital and he is unlikely to fund the Company to pay for any claims made against the Company for substantial debts or other obligations. In such situation, there can be no assurance that we shall be able to receive additional financing, and if we are unable to receive sufficient additional financing upon acceptable terms, it is likely that our business would cease operations or, at the very least, cease to be a reporting Company under the Exchange Act.
Recent Business Activities
As of the date of filing of this Form 10-Q, the Company has entered into preliminary discussions regarding a potential business combination and equity financing transaction with Renovo Resource Solutions, Inc. ("Renovo"), a Florida corporation located in Manatee County, Florida, and 6, LLC, a Florida limited liability real estate holding company controlled by Renovo which owns the land on which Renovo conducts its business (Renovo and 6 LLC, collectively the "Renovo Group"). Renovo is engaged in an environmentally friendly scrap yard operation. Renovo's operations are located on a site specifically engineered for its business and includes a new constructed facility for its operations. Renovo is a privately held company in which Mr. Toomey and his family have a one-third ownership interest. The Company has only commenced preliminary discussions with the Renovo Group and has not entered into a letter of intent or other undertaking with Renovo. It is anticipated that when the Company is analyzing the available alternatives, it will consider and evaluate, among other things, a potential business combination with Renovo in combination with a simultaneous equity financing transaction.
The Renovo Group has incurred indebtedness of approximately $6.1 million in connection with its business operations and land holdings, consisting primarily of the construction costs incurred in connection with its newly constructed facilities. In order for a business combination with the Renovo Group to be feasible, the Company and Renovo would need to simultaneously raise approximately $12,500,000 in equity financing ("Equity Financing") at the time of any such potential business combination in order (a) to repay the Company's outstanding indebtedness owed to Mr. Toomey, (b) to pay the costs associated with any business combination transaction and Equity Financing, and (c) for the Renovo Group to repay its outstanding debt obligations, to pay its operating expenses until such expenses can be paid from operating income, to finance the completion of the permitting and improvements needed on its operational site, and to permit it to take advantage of operational opportunities in its local community. Accordingly, if the Company were to pursue a business combination with the Renovo Group under such circumstances, it would likely require as a condition to any such business combination that the necessary Equity Financing be firmly committed and made available at the time of the consummation of such business combination. In the event that the Renovo Group is unable to commit to timely raising such Equity Financing, the Company would have no interest in pursuing a business combination transaction with the Renovo Group. Although we have commenced negotiations with the Renovo Group, we have not entered into a letter of intent or other undertaking with the Renovo Group for a business combination and no source of Equity Financing has been secured or is in the process of negotiations at this time. In view of the number of significant uncertainties surrounding a possible transaction, there is no assurance that the Company and the Renovo Group will reach any agreement with respect to a business combination and, if so, that they will be able to secure the Equity Financing necessary to consummation of such a transaction.
Delinquent Filings
The Company is filing this Quarterly Report on Form 10-Q and all other delinquent reports of Forms 10-K that it was required to file with the Commission since June 30, 2016. Although the filing of our delinquent reports under the Exchange Act will bring us current in our reporting obligations, it is the Commission's position that such filings will not "cure" Section 15(d) violations, and will not make us timely for purposes of eligibility to use certain Securities Act forms.