Three Month Periods Ended
Readers should refer to a description of the Net Asset Sale described in Note 1
to the condensed financial statements included in this Form 10-Q. As described
therein, the net assets and industrial controls businesses of the Company were
sold effective as of the close of business on
Liquidity and Capital Resources
Primary sources of liquidity for the Company following the
Page 7
As reflected in the accompanying balance sheet at
While it is the Company's objective to ultimately be able to use the securities
of the Company as a currency in the acquisition of portfolio businesses, the
initial acquisitions of portfolio businesses may require the Company to be
infused with additional capital thereby diluting the Company's shareholders,
including
Uncertainties Relating to Forward Looking Statements
"Item 2 - Management's Discussion and Analysis of Results of Operation" and other parts of this Form 10-Q contain certain "forward-looking statements" within the meaning of the Securities Act of 1934, as amended. While management of the Company believes any forward-looking statements it has made are reasonable, actual results could differ materially since the statements are based on current management expectations and are subject to risks and uncertainties. These risks and uncertainties include, but are not limited to the following:
• The outbreak of the novel coronavirus ("COVID-19") may adversely affect our
aility to identify acquisition targets and if identified, to evaluate, negotiate, and close on any acquisition. The worldwide COVID-19 pandemic has negatively affected the global economy, and it is likely to continue to do so. Since the beginning ofJanuary 2020 , the outbreak has caused significant volatility and disruption in the financial markets both globally and inthe United States . If COVID-19, or another highly infectious or contagious disease, continues to spread or the response to contain it is unsuccessful, we could experience material adverse effects on our business. The extent of such effects will depend on future developments that are highly uncertain and cannot be predicted, including the geographic spread of the virus, the overall severity of the disease, the duration of the outbreak, the measures that have be taken, or future measures, by various governmental authorities in response to the outbreak (such as quarantines, shelter-in-place orders and travel restrictions) and the possible further impacts on the global economy.
• We have had no operating history since
from operations since then. We have no material assets and we will sustain operating expenses without corresponding revenues, at least until the consummation of a business combination.
• Since we have no operating history, we will be subject to the risks inherent in
establishing a new business. We have not identified what our new line of business will be; therefore, we cannot fully describe the specific risks presented by such business.
• We may be unable to successfully identify and acquire a suitable merger partner
or acquisition candidate.
• We will incur significant costs in connection with our evaluation of suitable
merger partners and acquisition candidates. As part of our plan to acquire or
invest in strategically positioned companies, our management is seeking,
analyzing, and evaluating potential acquisition and merger candidates. We have
incurred and will continue to incur significant costs, such as due diligence
and legal and other professional fees and expenses, as part of these efforts.
Notwithstanding these efforts and expenditures, we cannot give any assurance
that we will identify an appropriate acquisition opportunity in the near term,
or at all. Page 8
• Because we may consummate a merger or acquisition with a company in any
industry and are not limited to any particular type of business, there is no current basis for shareholders to evaluate the possible merits or risks of the particular industry in which we may ultimately operate or the target business which we may ultimately acquire.
• The reporting requirements under federal securities law may delay or prevent us
from making certain acquisitions. Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended, require companies subject thereto to provide certain information about significant acquisitions, including certified financial statements for the company acquired, covering one, two, or three years, depending on the relative size of the acquisition. The time and additional costs that may be incurred by some target entities to prepare such statements may significantly delay or essentially preclude consummation of an otherwise desirable acquisition by us.
• The role of our management team and key personnel from the target business we
acquire cannot presently be ascertained. While we intend to closely scrutinize any individuals we engage after a redeployment of our assets, we cannot assure that our assessment of these individuals will prove to be correct.
• We must conduct a due diligence investigation of the target businesses we
intend to acquire. Intensive due diligence is time consuming and expensive due to the operations, accounting, finance, and legal professionals who must be involved in the due diligence process. We cannot assure that extensive diligence will reveal all material issues that may affect a particular target business, or that factors outside the control of the target business and outside of our control will not later arise.
• Net Operating Losses ("NOLs") may be carried forward to offset federal and
state taxable income in future years and eliminate income taxes otherwise payable on such taxable income, subject to certain adjustments. Based on current federal corporate income tax rates, our NOL carryforwards could provide a benefit to us, if fully utilized, of significant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our otherwise taxable income. If we do not have sufficient taxable income in future years to use the tax benefits before they expire, we will lose the benefit of these NOL carryforwards permanently. Consequently, our ability to use the tax benefits associated with our substantial NOL will depend significantly on our success in identifying suitable merger partners and/or acquisition candidates, and once identified, successfully consummate a merger with and/or acquisition of these candidates. Additionally, if we underwent an ownership change, the NOL carryforward limitations would impose an annual limit on the amount of the taxable income that may be offset by our NOL generated prior to the ownership change. The amount of NOL carryforwards that we have claimed has not been audited or otherwise validated by theU.S. Internal Revenue Service (the "IRS"). TheIRS could challenge our calculation of the amount of our NOL or our determinations as to when a prior change in ownership occurred and other provisions of the Internal Revenue Code may limit our ability to carry forward our NOL to offset taxable income in future years. If theIRS was successful with respect to any such challenge, the potential tax benefit of the NOL carryforwards to us could be substantially reduced.
• We may effect an acquisition or merger with a company located outside of the
risks associated with companies operating in the target business' home
jurisdiction, including any of the following a) rules and regulations or
currency conversion or corporate withholding taxes on individuals; b) tariffs
and trade barriers; c) regulations related to customs and import/export
matters; e) longer payment cycles; f) tax issues, such as tax law changes and
variations in tax laws as compared to
fluctuations and exchange controls; h) challenges in collecting accounts
receivable; i) cultural and language differences; j) employment regulations; j)
crime, strikes, riots, civil disturbances, terrorist attacks and wars; and l)
deterioration of political relations with
you that we would be able to adequately address these additional risks. If we
were unable to do so, our operations might suffer.
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• If we effect an acquisition or merger with a company located outside of the
United States , the laws of the country in which such company operates will govern almost all of the material agreements relating to its operations. We cannot assure you that the target business will be able to enforce any of its material agreements or that remedies will be available in this new jurisdiction. The system of laws and the enforcement of existing laws in such jurisdiction may not be as certain in implementation and interpretation as inthe United States . The inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business, business opportunities or capital.
• Compliance with the Sarbanes-Oxley Act of 2002 will require substantial
financial and management resources and may increase the time and costs of
completing an acquisition.
• In the event we engage in a business combination that results in us holding
passive investment interests in a number of entities, we could be subject to regulation under the Investment Company Act of 1940, and we would be required to register as an investment company and could be expected to incur significant registration and compliance costs.
• Management anticipates that it may be able to participate in only one potential
business venture because a business partner might require exclusivity. This lack of diversification should be considered a substantial risk to our shareholders because it will not permit us to offset potential losses from one venture against gains from another.
• Our common stock is quoted only on the OTC bulletin board and there may not be
a sustained trading market for our common stock.
• Our common stock may be subject to significant restriction on resale due to
federal penny stock restrictions.
• The market prices of our common stock have been highly volatile. The market has
from time to time experienced significant price and volume fluctuations that
are unrelated to the operating performance of particular companies.
• Although our stockholders may receive dividends if, as, and when declared by
our Board of Directors, we do not intend to pay dividends on our common stock
in the foreseeable future.
• Our Amended and Restated Articles of Incorporation provides that our Board of
Directors will be authorized to issue from time to time, without further stockholder approval, up to 30,000,000 shares of preferred stock in one or more series and to fix or alter the designations, preferences, rights and any qualifications, limitations, or restrictions of the shares of each series, including the dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, including sinking fund provisions, redemption price or prices, liquidation preferences, and the number of shares constituting any series or designations of any series. Such shares of preferred stock could have preferences over our common stock with respect to dividends and liquidation rights. We may issue additional preferred stock in ways which may delay, defer, or prevent a change in control of the Company without further action by our stockholders.
• A key element of our growth strategy is to make acquisitions, and in so doing,
we may issue additional shares of common stock as consideration for such acquisitions. These issuances could be significant. The issuance of new shares of common stock as consideration will dilute the equity interest of current stockholders.
• If the Company enters a business combination with a private concern, that, in
all likelihood, would result in the Company issuing securities to shareholders
of any such private company. The issuance of our previously authorized and
unissued Common Stock would result in reduction in percentage of shares owned
by our present and prospective shareholders and may result in a change in our
control or in our management.
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• Our principal shareholder,
common stock.Mr. Dorman's wife owns 3.44% of our common stock. Consequently, they will have significant influence over all matters requiring approval by our shareholders, but not requiring the approval of the minority shareholders. In addition,Mr. Dorman is an officer and director of the Company. Because he and his wife own or control a majority of our common stock, they will be able to elect all of the members of our board of directors, allowing them to exercise significant control of our affairs and management. In addition, they may transact most corporate matters requiring shareholder approval by written consent, without a duly-noticed and duly-held meeting of shareholders.
• Uncertainties discussed elsewhere in "Management's Discussion and Analysis of
Results of Operations".
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