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.
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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.
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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.
11
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.
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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.
13
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.
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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.
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