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, 2021, we have
identified critical accounting policies and estimates for our business.
Plan of Operation
We are a corporation with limited operations and no revenues from our business
operations. 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 February 8, 2021, we entered into an Agreement and Plan of Reorganization
("Merger Agreement") with Newtown Merger Sub Corp., a Delaware corporation and
the Company's wholly owned subsidiary ("Merger Sub"), and Cyxtera Cybersecurity,
Inc. (doing business as Appgate), a Delaware corporation ("Appgate"). Pursuant
to the Agreement, Merger Sub will merge with Appgate (the "Merger") with Appgate
being the surviving entity of the Merger and becoming a wholly-owned subsidiary
of the Company.
Upon consummation of the Merger (the "Closing"), each share of Appgate's common
stock outstanding on the closing date will be converted into 234,299.84 shares
of the Company's common stock. Additionally, the Company will assume all of
Appgate's obligations under its note issuance agreement ("Notes Issuance
Agreement") and the 5% convertible senior notes ("Convertible Senior Notes")
issued thereunder in an aggregate principal amount of $50 million, with an
additional aggregate principal amount of $25 million subject to issuance at
Closing (the "Additional Notes") and a further aggregate principal amount of $25
million issuable, in the option of the holders, within 12 months of signing of
the Merger Agreement.
It is estimated that, at the Closing and assuming none of the Convertible Senior
Notes or Additional Notes have been converted into shares of the Company's
common stock and not taking into account an equity incentive plan, the current
stockholder's of Appgate will own approximately 89% of the outstanding shares of
the Company's common stock and the current stockholders of the Company will own
approximately 11% of the outstanding common stock of the Company.
The Merger is expected to be consummated in the third quarter of 2021, subject
to the fulfillment of certain closing conditions.
10
Equity Transactions
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.
11
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 assumed 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 was 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 was utilized by the
Company to fund working capital needs.
12
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
Ironbound was extended from August 31, 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 was
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 was utilized by the Company to fund working capital needs.
Effective November 12, 2019, the maturity dates of the outstanding promissory
notes held by Ironbound 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 was utilized by the Company to fund working capital needs.
Effective August 31, 2020, the maturity dates of the Outstanding Notes and the
August 2018 Note and December 2018 Note was extended from August 31, 2020 to
August 31, 2021.
On August 18, 2020, we issued a convertible promissory note (the "August 2020
Note") in the principal amount of $20,000 to Ironbound. The August 2020 Note has
a maturity date of August 31, 2021 and bears interest at the rate of 5.0% per
annum, payable at maturity. The principal and accrued interest on the August
2020 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 August 2020 Note), or upon the consummation of a "Fundamental
Transaction" (as defined in the August 2020 Note) at the "Conversion Price" (as
defined in the August 2020 Note). The proceeds of the August 2020 Note was
utilized by the Company to fund working capital needs.
The outstanding notes are now past due and are expected to be repaid upon
consummation of the Merger.
As of September 30, 2021, our authorized capital stock consisted of 100,000,000
shares of Common Stock and 1,000,000 shares of Preferred Stock of which
14,643,740 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.
Currently, we have no employees and our main purpose has been to effect a
business combination with Appgate. 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.
13
Results of Operations
THREE MONTH PERIOD ENDED SEPTEMBER 30, 2021 COMPARED TO THE THREE MONTH PERIOD
ENDED SEPTEMBER 30, 2020
We are a corporation with limited operations and did not have any revenues
during the three month periods ended September 30, 2021 and 2020, respectively.
Total expenses from continuing operations for the three months ended September
30, 2021 and 2020 were $66,029 and $15,804, respectively. The majority of these
expenses primarily constituted general and administrative expenses related to
accounting, legal and compliance with the Securities Exchange Act of 1934, as
amended ("Exchange Act"). The increase in expenses was primarily as a result of
increased legal fees and filing fees with the SEC incurred by us in connection
with our proposed Merger with Appgate.
SIX MONTH PERIOD ENDED SEPTEMBER 30, 2021 COMPARED TO THE SIX MONTH PERIOD ENDED
SEPTEMBER 30, 2020
We are a corporation with limited operations and did not have any revenues
during the six month periods ended September 30, 2021 and 2020, respectively.
Total expenses from continuing operations for the six months ended September 30,
2021 and 2020 were $84,173 and $30,663, respectively. The majority of these
expenses primarily constituted general and administrative expenses related to
accounting, legal and compliance with the Exchange Act. The increase in expenses
was primarily as a result of increased legal fees and filing fees with the SEC
incurred by us in connection with our proposed Merger with Appgate.
Liquidity and Capital Resources
At September 30, 2021, 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 September 30, 2021, we had promissory notes in the aggregate principal amount
of $367,000 payable to Ironbound, our majority stockholder. We had cash of
$8,665 and negative working capital of $636,646. 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 condensed 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.
14
Use of Estimates
In preparing our unaudited condensed 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. Actual results could differ from those estimates. The estimates
include valuation of deferred taxes and valuation of contributed services.
Commitments
We do not have any commitments which are required to be disclosed in tabular
form as of September 30, 2021.
Off-Balance Sheet Arrangements
As of September 30, 2021, 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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