Forward Looking Statements

Some of the statements contained in this report discuss our plans and strategies for our business or state other forward-looking statements, as this term is defined in the Private Securities Litigation Reform Act of 1995. Statements that are not statements of historical facts may be deemed to be forward-looking statements. The words "anticipate," "believe," "estimate," "expect," "plan," "intend," "should," "seek," "will," and similar expressions are intended to identify these forward-looking statements but are not the exclusive means of identifying them. These forward-looking statements reflect the current views of our management. However, various risks, uncertainties and contingencies could cause our actual results, performance or achievements to differ materially from those expressed in, or implied by, these statements. See our Form 10-K for the year ended February 29, 2020 for a discussion of certain known risks; also see Part II, Item 1A.

Overview, Background and History

We are currently a "shell company" with no meaningful assets or operations other than our efforts to identify and merge with an operating company. We no longer have any full-time employees and our Chief Executive and Chief Financial Officers serve on a part-time consulting basis.

Prior to March 2003, our business had been focused on pre-revenue development and commercialization of disposable medical devices designed to enhance the effectiveness of magnetic resonance imaging in detection and diagnosis of heart disease. Due to the unavailability of funding, beginning in the fall of 2002 we essentially ceased all of our operations including product development and commercialization activities. Our efforts to realize value for our prior business and MRI technology have been unsuccessful. As a result, we view our most viable option to be merging with an unrelated operating company that would benefit from our status as a reporting company in a so-called "reverse merger" transaction. Entering into a "reverse merger" would likely involve very substantial dilution to the existing stockholders. It would, however, provide an opportunity to return some value to stockholders. While we have identified and explored merging with a number of candidates over the past few years and entered into definitive agreements with one candidate (which agreement was subsequently terminated), we have no commitments to merge with any company at the present time.

In January 2017, the Company's President and Chief Executive Officer (the "CEO") entered into an Asset Purchase Agreement (the "Purchase Agreement") with the Company. Under the Purchase Agreement, the CEO purchased all of the intellectual property rights, any and all physical assets, any and all permits and all non-financial books, records, files, design specification, software and other data related to the Company's magnetic resonance imaging technology. In exchange for purchased assets, the CEO (a) assumed all liabilities of the Company related exclusively to the purchased assets and (b) agreed to forgiveness of all indebtedness owing from the Company totaling approximately $110,000 including intellectual property counsel fees and costs, $68,000 of which had been paid by and is therefore due to the CEO for payments he has made on the Company's behalf in prior years in an attempt to preserve certain intellectual property rights at that time. The CEO ceased making such payments several years ago and, as such, the underlying intellectual property became compromised.

In order to raise cash to continue our efforts to pursue a reverse merger, on October 31, 2005, the Company consummated a stock purchase agreement with Magna Acquisition LLC ("MALLC") which resulted in a change of control of our Company. Under the agreement, we sold 300,000 shares of Class A Common Stock to MALLC for gross proceeds of $190,000, before expenses. Contemporaneous with the new investment, MALLC purchased from our former principal stockholder 307,727 shares of the Company's Class A Common Stock, representing all the shares of our common stock owned by that stockholder. Two of our directors and our Chief Financial Officer serve as sole managers of MALLC, with the ability to vote and dispose of the shares of our Company owned by MALLC by majority vote. These directors have assumed a lead role with management in pursuing financing and merger candidates and operating matters.





                                       10

                                                             Table of Contents

MALLC has been responsible for substantially all of our funding since October 2005 and until June 30, 2020. During the period from October 2005 through and including May 31, 2020, MALLC loaned us an aggregate of approximately $687,000 under a series of promissory notes payable that mature 120 days from issuance. At May 31, 2020, approximately $687,000 face amount of such notes were beyond their maturity date and therefore due on demand. The notes bear interest at 12% per year increasing to 15% per year for periods beyond maturity. Since May 2019, a director of the Company loaned the Company approximately $29,000 (including approximately $10,000 loaned subsequent to May 31, 2020) under unsecured notes payable with substantially the same terms as the MALLC notes payable except that the interest rate decreased from 12% to 10% and the penalty interest rate decreased from 15% to 12%. The Company intends to make a proposal to MALLC and to this director to convert all of the amounts outstanding to them (including overdue amounts) into common stock of the Company.

While we have reduced our expenditures very significantly, we do not have sufficient cash to continue our activities for the coming twelve months. We currently do not have any commitments for new funding. Subsequent to May 31, 2020, on July 2, 2020 the Company's noteholders, MALLC and Joel Kanter, entered into an agreement to sell the notes payable by the Company to a third party as further described in Note 7 to Item 1. Financial Statements.





Recent Developments -



COVID-19

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a "Public Health Emergency of International Concern." On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a "pandemic." COVID-19 has resulted in a widespread health crisis that has adversely affected the economies and financial markets worldwide. The business of any potential target business with which we consummate a business combination could be materially and adversely affected. Furthermore, we may be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings with potential investors or the target company's personnel, vendors and services providers are unavailable to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19 impacts our search for a business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extended period of time, our ability to consummate a business combination, or the operations of a target business with which we ultimately consummate a business combination, may be materially adversely affected.

Sale of Related Party Notes Payable; Change in Control -

Subsequent to May 31, 2020, on July 2, 2020 the Company's noteholders, MALLC and Joel Kanter, entered into an agreement to sell the notes payable by the Company to a third party as further described in Note 5 to Item 1. Financial Statements. Such sale of notes and stock is expected to result in a change in control of the Company as some or all of the notes are expected to be converted into shares of Class A common stock.

Results of Operations for the Three Months Ended May 31, 2020 compared to the three months ended May 31, 2019

We have neither engaged in any operations or generated any revenues during the three months ended May 31, 2020 and 2019. We incur expenses associated with being a public company including financial reporting and compliance and accounting and audit.

Operating expenses for three months ended May 31, 2020 were approximately $7,000 compared to $8,000 the three months ended May 31, 2019 due to comparable levels of activities on both periods. Interest expense was approximately $27,000 for the 2020 period compared to $26,000 during the same period ended May 31, 2019. The slight increase in interest expense was attributable to higher levels of borrowing for the period ended May 31, 2020.

During the three months ended May 31, 2020 we recorded a net loss of $34,000 compared to a net loss of $34,000 for the three months ended May 31, 2019.

Our expenses, particularly professional and consulting fees, can increase significantly if we are actively engaged in negotiations for a merger transaction. There can be no assurance that any of our activities will result in any transaction. Our interest expenses are increasing with additional outstanding borrowings

Financial Condition, Liquidity and Capital Resources





Going concern

As indicated in the accompanying interim unaudited condensed consolidated financial statements, at May 31, 2020, the Company had approximately $-0- of cash and negative working capital of approximately $1,832,000 and stockholders' deficit of $1,832,000. These factors, among others, indicate that the Company is in need of additional financing or a strategic arrangement in order to continue its planned activities for the fiscal year that began on March 1, 2020. The Company's plans to deal with this uncertainty are described above in "Company Activities." Management's plans to raise capital, enter into a strategic arrangement or sell or merge with an unrelated business have not been successful to date and there can be no assurance that management's plans can be realized at all. Historically, substantially all of the Company's financing, has come from shareholder loans. There can be no assurance that additional shareholder loans will be extended to the Company.

These factors, among others, raise substantial doubt about the Company's ability to continue operations as a going concern. No adjustments have been made in the accompanying condensed consolidated financial statements to the amounts and classification of assets and liabilities which could result should the Company be unable to continue as a going concern.

Off Balance Sheet Arrangements

The Company has no material off balance sheet arrangements that are likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures.

Critical Accounting Principles

The preparation of consolidated financial statements in accordance with US GAAP requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results can, and in many cases will, differ from those estimates. We have not identified any critical accounting policies.





                                       11

                                                             Table of Contents

© Edgar Online, source Glimpses