General
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 years ended September 30, 2022 and 2021. 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 audited financial statements and the accompanying notes
included elsewhere in this Form 10-K. 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 that
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 elsewhere in this Form 10-K.
Overview
Operations. The Company has not conducted any substantial operations since May
24, 2010, the date on which AMI foreclosed on and took possession of all of the
Company's then-existing operating entities other than those sold by the Company
to an entity affiliated with Mr. King.
During the fiscal years ended September 30, 2013 and 2014, the Company's primary
activities consisted of taking the steps necessary to reactivate its reporting
obligations under Section 15(d) of the Exchange Act that had been suspended
since 2011 (referred to as the Reactivation Actions). On December 17, 2014, the
Company completed its Reactivation Actions and recommenced its reporting
obligations under the Exchange Act. However, the Company was unsuccessful in its
endeavor to identify and engage in a business combination with a potential
target company or business following its Reactivation Actions and, as of the
fiscal year ended September 30, 2016, the Company had expended substantially all
of its available cash and was unable to secure any additional funds to finance
its operations. As a result, the Company 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 its Filing Updates and to again aggressively pursue an
acquisition target. In order for the Company to finance the preparation and
filing of such delinquent periodic reports with the Commission, Mr. Toomey, a
principal shareholder, director and secretary of the Company, loaned the Company
funds during the fiscal year ended 2020 and the first quarter of the 2021 fiscal
year to finance such activities.
On March 2, 2022, the Company completed its Filing Updates with the Commission
under the Exchange Act of all its delinquent periodic reports on Form 10-K for
the fiscal years ended September 30, 2016 through 2021, as well as Forms 10-Q
for the most recently completed fiscal year ended.
Following the completion of the Filing Updates, the Company engaged in the
process of pursuing suitable private company candidates for a business
combination with the goal of maximizing shareholder value. The Company was not
been engaged in any business activities other than seek a business combination
transaction.
Prior to completing the Filing Updates, the Company had entered into preliminary
discussions regarding a potential business combination with Renovo. However,
Company had only commenced preliminary discussions with the Renovo Group as of
the date of the Filing Updates and had not entered into a letter of intent or
other arrangements with Renovo. Further, the Company also was analyzing other
available alternatives and financing arrangements. The Company undertook due
diligence and continued discussions with Renovo through the end of the September
30, 2022 fiscal year.
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Financial Condition. We did not record revenues from operations during the
fiscal years covered by our financial statements included in this Form 10-K and
are not currently engaged in any business activities that provide cash flows. We
do not expect to generate any revenues over the next 12 months, unless we enter
into and complete a business combination transaction, such as the Merger
transaction, during that period of time. 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 a 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.
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 stockholders' 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 Reactivation
Actions. However, Mr. Toomey temporarily ceased financing our operations at the
end of our 2016 fiscal year end.
Following our determination that the business environment was once again
favorable to pursue our strategy, Mr. Toomey again agreed to provide us with
debt financing 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 "Subsequent Developments" 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
"Subsequent Developments" 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-K are not meaningful to our future results.
Results of Operations
Comparison of Years Ended September 30, 2022 and 2021
Revenues. Because we currently do not have any business operations, we have not
had any revenues during our fiscal years ended September 30, 2022 and September
30, 2021.
Operating Expenses. We had operating expenses of $185,000 and $89,777 for the
fiscal years ended September 30, 2022 and 2021, respectively. These expenses
during the fiscal years ended September 30, 2022 and September 30, 2021
primarily consisted of payments associated with maintaining our corporate status
and expenses were incurred in connection with our professional fees to prepare
and file certain of our delinquent SEC filings in connection with the Filing
Updates. During the fiscal years ended September 30, 2022, we also had $185,750
in expenses and professional fees incurred in connection with our due diligence
of, and negotiations regarding a potential business combination with, the Renovo
Group ("Renovo Related Fees"). The increase in such expenses for the fiscal year
ended September 30, 2022 as compared to the same period ended September 30, 2021
primarily was due to such Renovo Related Fees.
Other Expenses. We had interest expenses of $6,327 and $6,899 for the fiscal
years ended September 30, 2022 and 2021, respectively. The interest expenses in
2022 declined from those in 2021 due to reduced interest rates incurred on
advances from related parties during 2022 as compared to 2021.
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Net Income (Loss). We recognized a net loss of $192,127 for the fiscal year
ended September 30, 2022 as compared to a net loss of $96,676 for the fiscal
year ended September 30, 2021. The increase in net loss was directly
attributable to the payment of additional professional fees incurred in
connection with the Filing Updates and the Renovo Related Fees incurred during
the current fiscal year.
Liquidity and Capital Resources
As of September 30, 2022, we had limited available cash resources and we had a
working capital deficit of $324,191. Our current liabilities were $324,437 at
September 30, 2022 and $350,341 at September 30, 2021. Total assets decreased to
$ 246 as of September 30, 2022 from $38,277 as of September 30, 2021 due
primarily to the additional expenses associated with the Renovo Related Fees in
the fiscal year ended September 30, 2022.
We had no material commitments for capital expenditures as of September 30, 2022
and 2021. However, if we are able to execute our business plan as anticipated in
the future, including the consummation of the proposed Merger transaction with
the Renovo Group described below and in "Item 1. Business - Recent Developments
- Proposed Merger Transaction," we would likely incur substantial capital
expenditures and require additional financing to fund such expenditures.
Following the completion of the Filing Updates, the Company borrowed $50,000 in
aggregate principal amount from James K. Toomey, the Company's corporate
secretary and a director, (the "Toomey Loan"). The Toomey Loan is evidenced by a
consolidated promissory note, dated March 7, 2022, issued by the Company to Mr.
Toomey (the "2022 Promissory Note"). The 2022 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, 2024. The maturity date of the 2022 Promissory
Notes will accelerate and be due and payable immediately upon any change of
control, merger, or other business combination (as defined in the 2022
Promissory Note). If the maturity date is extended for any reason whatsoever
(including in connection with an acceleration event), the 2022 Promissory Note
will bear interest at a rate of 5% per annum, commencing on the date of any such
extension. The 2022 Promissory Note is not convertible into our common shares.
The proceeds of the Toomey Loan were used to pay outstanding amounts owed for
professional services, to pay operating expenses, and to pursue the Company's
acquisition strategy.
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 will continue to be dependent upon future loans or equity
investments from our present shareholders or management to fund operating
shortfall 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, there are no existing undertakings, commitments, or
agreements for any debt or equity financings and there is no assurance to that
effect. Further, our need for capital may change dramatically if unknown claims
or debts surface or if we acquire a business opportunity. There can be no
assurances that any additional financings will be available to us on
satisfactory terms and conditions, if at all. Unless we can obtain additional
financing, our ability to continue as a going concern is doubtful.
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.
However, in connection with the execution of the Merger Agreement as discussed
in "-Subsequent Developments" below, Renovo provided the Company with a $200,000
loan to assist in the funding of ongoing operations pending the consummation of
the proposed Merger transaction.
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Subsequent Developments
On October 28, 2022, the Company and Renovo entered into the Merger Agreement,
as discussed in greater detail in "Item 1. Business - Recent Developments -
Proposed Merger Transaction," pursuant to which Renovo will be merged with and
into the Company, with the Company being the legal successor or surviving
corporation in the Merger.
Pursuant to the terms of the Merger Agreement, Renovo loaned $200,000 in
principal amount to the Company on October 28, 2022 (referred to as the Renovo
Loan). The Renovo Loan is evidenced by a consolidated promissory note, dated
October 28, 2022, issued by the Company to Renovo (referred to as the Renovo
Promissory Note")
The Renovo Promissory Note bears interest, commencing on the date of the loan,
at an initial rate of 6% per annum and the note matures on October 28, 2024. No
payments of principal or interest are due prior to the maturity date and on such
date all such amounts are payable in full. The Company may prepay the amounts
owed under the Renovo Promissory Note at any time without any prepayment
penalties. In the event of a default by the Company under the Renovo Promissory
Note, the outstanding principal amount, accrued and unpaid interest, and all
other amounts payable under the Renovo Promissory Note shall become immediately
due and payable without notice, declaration, or other act on the part of the
Renovo.
The proceeds of the Renovo Loan have been used to provide the funds necessary
for the Company to continue operations and consummate the transactions
contemplated by the Merger Agreement.
Off-Balance Sheet Arrangements
We do not have any off balance sheet arrangements.
Critical Accounting Policies and Estimates
We prepare our financial statements in conformity with accounting principles
generally accepted in the United States of America ("GAAP"), which requires
management to make certain estimates and assumptions and apply judgments.
In its report dated December 30, 2022, our auditors, Accell Audit & Compliance
P.A., expressed an opinion that there is substantial doubt about our ability to
continue as a going concern. Our financial statements do not include any
adjustments that may result from the outcome of this uncertainty. We generated
no operating revenues for the fiscal years ended September 30, 2022 and 2021,
and at September 30, 2022, we had a stockholders' deficit of $524,191.
Furthermore, at September 30, 2022 and 2021, we had an accumulated deficit of
$4,894,498 and $4,702,371, respectively, and a working capital deficit of
$324,191 at September 30, 2022. As a result of our working capital deficiency
and anticipated operating costs for the next twelve months, we do not have
sufficient funds available to sustain our operations for a reasonable period
without additional financing. Our continuation as a going concern is therefore
dependent upon future events, including our ability to close the proposed Merger
transaction or raise additional capital and to generate positive cash flows.
We base our estimates and judgments on historical experience, current trends,
and other factors that management believes to be important at the time the
financial statements are prepared; actual results could differ from our
estimates and such differences could be material. We have identified below the
critical accounting policies, which are assumptions made by management about
matters that are highly uncertain and that are of critical importance in the
presentation of our financial position, results of operations and cash flows.
Due to the need to make estimates about the effect of matters that are
inherently uncertain, materially different amounts could be reported under
different conditions or using different assumptions. On a regular basis, we
review our critical accounting policies and how they are applied in the
preparation of our financial statements.
Use of Estimates. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets, if any, at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
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Income Taxes. Deferred taxes are provided on the asset and liability method
whereby deferred tax assets are recognized for deductible temporary differences
and operating loss and tax credit carry forwards and deferred tax liabilities
are recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Future tax benefits for net operating loss carry forwards are recognized
to the extent that realization of these benefits is considered more likely than
not. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized.
The Company follows the provisions of FASB ASC 740-10 "Uncertainty in Income
Taxes" (ASC 740-10). A reconciliation of the beginning and ending amount of
unrecognized tax benefits has not been provided since there are not unrecognized
benefits for all periods presented. The Company has not recognized interest
expense or penalties as a result of the implementation of ASC 740-10. If there
were an unrecognized tax benefit, the Company would recognize interest accrued
related to unrecognized tax benefit in interest expense and penalties in
operating expenses.
Net Income (Loss) Per Share. Basic income (loss) per share is computed by
dividing net income (loss) available to common shareholders by the weighted
average number of outstanding common shares during the period of computation.
Diluted loss per share gives effect to potentially dilutive common shares
outstanding. The Company gives effect to these dilutive securities using the
Treasury Stock Method. Potentially dilutive securities also include other
convertible financial instruments. The Company gives effect to these dilutive
securities using the If-Converted-Method.
New Accounting Pronouncements
For a description of recent accounting standards, including the expected dates
of adoption and estimated effects, if any, on our financial statements, see
"Note 8: Recent Accounting Pronouncement" in Part II, Item 8 of this Form 10-K.
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