The following discussion and analysis of financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes included elsewhere in this report. This discussion
contains forward-looking statements that involve risks, uncertainties and
assumptions. See "Note Regarding Forward-Looking Statements." Our actual results
could differ materially from those anticipated in the forward-looking statements
as a result of certain factors discussed in "Risk Factors" and elsewhere in this
report.
Overview
In July of 2022 we acquired RAC Real Estate Acquisition Corp, a Wyoming
Corporation (RAC). RAC is now a wholly owned subsidiary of the Company. The
Company, through RAC, plans to focus on real estate transactions, in which we
will buy and develop real estate for sale or rent of low-income housing. We plan
to invest in three sectors of this market by (i) buying, refurbishing and
selling traditional foreclosures, (ii) buying, developing and renting "Land
Banks" that have an average pool of homes or lots in excess of 100 in one
location and (iii) buying, refurbishing or developing and selling homes made
available by the government through HECM pools. We are currently working with a
third-party vendor to facilitate this plan.
On July 22, 2022, the Company received a promissory note, in the principal
amount of $672,960 from, and entered into a Loan Agreement dated July 18, 2022
with, Fix Pads Holdings, LLC a South Carolina limited liability company. The
note has a 12% interest rate per annum payable as follows: (1) a pre-payment on
July 22, 2022 of pro-rated interest for the period from July 22, 2022 through
July 30, 2022 in the amount of $2,212.47; (2) a pre-payment of interest on
August 1, 2022 for the period from August 1, 2022 through September 30, 2022 in
the amount of $13,496.07; and then (3) monthly payments of interest only
beginning on October 1, 2022 and continuing on the 1st day of each month
thereafter until all principal and accrued interest are paid in full by July 1,
2023. The note is secured by mortgages or deeds of trust on 7 properties.
Consideration for the note was paid in part by the Company in the amount of
$328,625.72 and in part by an investor, Frank Campanaro, in the amount of
$328,625.73 (together both amounts equal $657,251.45 which represent the total
note amount of $672,960 minus the two prepayments described above). On July 26,
2022, The Company entered into a partial assignment of the promissory note dated
July 25, 2022, with Mr. Campanaro whereby the Company assigned to Mr. Campanaro
the right to payment of principal in the amount of $336,480 and the right to
half of the amount of any interest payments made on the principal amount of the
note.
On August 18, 2022, the Company received a promissory note, in the principal
amount of $358,620 from, and entered into a loan agreement, with, Fix Pads
Holdings, LLC. The note has a 12% interest rate per annum payable as follows:
(1) a pre-payment on August 19, 2022 of pro-rated interest for the period from
August 19, 2022 through August 31, 2022 in the amount of $1,414.82; (2) a
pre-payment of interest on August 19, 2022 for the period from September 1, 2022
through October 31, 2022 in the amount of $7,192.06; and then (3) monthly
payments of interest only beginning on November 1, 2022 and continuing on the
1st day of each month thereafter until all principal and accrued interest are
paid in full by August 1, 2023. The note is secured by mortgages or deeds of
trust on 4 properties. Consideration for the note was paid in part by the
Company in the amount of $175,006.56 and in part by Mr. Campanaro, in the amount
of $175,006.56 (together both amounts equal $350,013.12 which represent the
total note amount of $358,620 minus the two prepayments described above). On
August 18, 2022, the Company entered into a partial assignment of the promissory
note with Mr. Campanaro whereby the Company assigned to Mr. Campanaro the right
to payment of principal in the amount of $179,310 and the right to half of the
amount of any interest payments made on the principal amount of the note.
On October 4, 2022, the Company, through RAC, entered into a Limited Liability
Agreement with Fixed Pads Holdings. As a result of the agreement, RAC and fix
pads formed a limited liability company called RAC FIXPADS II, LLC, incorporated
in the state of Delaware. The purpose of which is to purchase, finance,
collateralize, improve, rehabilitate, market, sell or lease property, as well as
carry on any lawful business, purpose or activity. The LLC has two members RAC
and Fix Pads, both providing an initial contribution to the LLC of $1,000 in
exchange for a 50% membership interest represented by an issuance of 1,000 Units
of the LLC to each party. Each member is entitled to 1 vote per member. The LLC
is managed by a manager, Fix Pads.
The Agreement provides that additional capital contributions of the members will
be made to the LLC as follows: (i) Fix Pads will transfer and assign all rights
to and incidents of ownership for 60 residential properties it has title, or
will have title, to the LLC, as set forth in the Agreement; and (ii) RAC will
make additional cash contributions to the capital of the LLC, up to a maximum of
$5,214,000, on such dates and in such amounts as requested by the LLC, in the
manner set forth in the Agreement.
Under the Agreement profits and losses are allocated by the LLC to the members
based on initial cash contributions of the members, the value of the properties
contributed by Fix Pads and the additional cash contributions by RAC.
Distributions to the members under the Agreement will be made as follows: (i)
from the sale of each property by the LLC, the LLC shall distribute $13,000 of
the net sale proceeds to RAC and distribute and additional amount to RAC equal
to the average RAC additional cash capital contribution per property, the
balance net proceeds will be distributed to Fix Pads; (ii) for any property that
is leased by the LLC, RAC will have the option to buy such property from the LLC
and for any such property that is not bought by RAC, any net rental income will
be retained by the LLC and distributed to the members based on (a) further
written agreement of the members or (b) if the members are unable to agree then
on such terms as provided in the Agreement.
Since the acquisition of RAC, the Company, through our third-party vendor, has
financed 11 foreclosed homes to be refurbished and sold as a test of the
viability of this business model. Our plan over the next 12 months is to finance
over 70 foreclosed homes to be refurbished and sold. We plan further to contract
with Land Bank lots in excess of 100 lots to be developed into homes for rent.
The Land Bank homes are to be constructed with new state of the art panel
designed homes that are manufactured in Europe. This will significantly reduce
the cost and time of construction for these homes.
Prior to March 16, 2018, we were engaged in the development of mining assets. We
never generated any revenue from this business and as of April 30, 2018, all of
the assets associated with the mining business were fully reserved against and
have no value. On March 16, 2018, we had a change in management and changed our
business to developing the business of designing and selling computer equipment
which can be used for the mining of cryptocurrency. In April 2019, our sole
director and officer resigned and we discontinued the business of designing and
selling computer equipment for the cryptocurrency business, from which we did
not generate any revenue. On August 14, 2019, the then sole officer and director
resigned and Jose Maria Eduardo Gonzalez Romero was elected as our sole officer
and director. In 2018 we purchased certain equipment for $500,000 borrowed from
Mr. Romero. The equipment was never delivered to us in the United States, and on
October 29, 2021, we entered into a settlement agreement with Gygabyte whereby
we paid $10,790 to Gigabyte. Four pallets of equipment have been shipped from
Taiwan and are expected to arrive in the U.S. next quarter. The equipment is in
component parts and there is no assurance if this can be assembled and mined or
sold since this equipment was purchased over three years ago.
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On November 1, 2021, we entered into a settlement with Mr. Romero whereby he
converted the principal amount of his $500,000 loan along with accrued interest
into shares of the company at $.02 per share and we issued additional shares to
him for his service as the CEO under his previous employment agreement. The
total number of shares issued to Mr. Romero for his note conversion and
compensation was 35,189,100.
On June 15, 2022, the Company's common stock was reverse split at a 1:125 ratio.
As a result, our outstanding shares of common stock went from 74,498,250 common
stock outstanding to 595,986 common stock outstanding. References in this
annual report to shares of common stock outstanding reflect this reverse stock
split, unless otherwise stated.
Result of operations
From inception (May 11, 2022) to July 31, 2022
On July 1, 2022, the Company entered into an Agreement and Plan of
Reorganization dated June 30, 2022 (the "Agreement") with RAC Real Estate
Acquisition Corp., a Wyoming Corporation ("RAC") incorporated on May 11, 2022,
and the Shareholders of RAC, namely Frank Gillen, Francis Pittilloni, and
Yolanda Goodell ("Shareholders"), whereby the Company issued to the Shareholders
a combined 100,000 shares of Series A Preferred Stock, par value of $0.001 per
share in consideration for a combined 1,000 shares of RAC common stock, par
value $0.001, held by Shareholders, which represents 100% of the issued and
outstanding capital stock of RAC. As a result, RAC became a wholly owned
subsidiary of the Company. Shareholders of RAC paid a combine capital
contribution of $500,000 in cash as consideration for their combine 1,000 shares
of RAC common stock.
For financial accounting purposes, this transaction was treated as a reverse
acquisition by RAC and resulted in a recapitalization with RAC being the
accounting acquirer and the Company as the acquired company. The consummation of
this reverse acquisition resulted in a change of control. Accordingly, the
historical financial statements prior to the acquisition are those of the
accounting acquirer, RAC, and have been prepared to give retroactive effect to
the reverse acquisition completed on June 30, 2022, and represent the operations
of RAC. The consolidated financial statements after the acquisition date, June
30, 2022, include the balance sheets of both companies at fair value, the
historical results of RAC and the results of the Company from the acquisition
date. All share and per share information in the accompanying consolidated
financial statements and footnotes has been retroactively restated to reflect
the recapitalization.
May 11, 2022
(Inception) to
July 31,
2022
Revenue $ 1,106
Operating expenses 59
Professional fees 24,285
Net loss $ 23,238For the inception (May 11, 2022) to July 31, 2022, we generated revenue from
interest income of $1,106.
We incurred operating expenses of $24,344, primarily professional fees,
resulting in a loss from operations of $23,238. We did not incur other expenses,
resulting in a net loss from continuing operations of $23,238, or ($0.10) per
share (basic and diluted).
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Liquidity and Capital Resources
The following table summarizes our working capital at July 31, 2022:
July 31,
2022
Current assets $ 337,198
Current liabilities $ 28,635
Working capital $ 308,563
The following tables summarize our cash flows from inception to July 31, 2022.
May 11, 2022
(Inception) to
July 31,
2022
Cash used in operating activities $ (9,669 )
Cash used in investing activities $ (328,291 )
Cash provided by financing activities $ 338,678
Cash on hand
$ 718
Operating activities
The cash flow used in operating activities for the inception (May 11, 2022) to
July 31, 2022, reflects the net loss of $23,238, adjusted by non-cash interest
income of $1,106, increased by accounts payable and accrued liabilities of
$8,850 and due to related parties of $5,825.
Investing activities
For the inception (May 11, 2022) to July 31, 2022, the Company received cash
from acquisition of subsidiary of $335 and used $328,626 for advance on loan
receivable.
Financing activities
For the inception (May 11, 2022) to July 31, 2022, the Company received cash
from issuance of Series A Preferred stock of $500,000 and repaid $161,322 to
related parties.
Going Concern
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates the
realization of assets and the liquidation of liabilities in the normal course of
business. During the year ended July 31, 2022, the Company incurred a net loss
of $23,238. As of July 31, 2022, the Company had an accumulated deficit of
$23,238. In order to continue as a going concern, the Company will need, among
other things, additional capital resources. Management's plans to raise
necessary funding through equity financing arrangements, which may be
insufficient to fund its capital expenditures, working capital and other cash
requirements for the year ended July 31, 2023. However, until the Company
engages in an active business or makes an acquisition the Company is likely to
not be able to raise any significant debt or equity financing.
The ability of the Company to begin operations in its new business model is
dependent upon, among other things, obtaining financing to commence operations
and develop a business plan or making an acquisition. The Company cannot give
any assurance as to its ability to develop or acquire a business or to operate
profitably.
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These factors, among others, raise substantial doubt about the Company's ability
to continue as a going concern. The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
Critical Accounting Policies
Use of Estimates: The preparation of the accompanying consolidated financial
statements in conformity with GAAP requires management to make certain estimates
and assumptions that directly affect the results of reported assets,
liabilities, revenue, and expenses, including the valuation of non-cash
transactions. Actual results may differ from these estimates.
Debt Investments
The Company's debt securities are primarily invested in a third-party vendor,
and asset management company, to purchase, develop and manage real estate
properties. Given the nature of lending to these types of businesses,
substantially all of the Company's investments in these portfolio companies are
considered Level 3 assets under ASC Topic 820 because there generally is no
known or accessible market or market indexes for debt instruments for these
investment securities to be traded or exchanged. The Company may, from time to
time, invest in public debt of companies that meet the Company's investment
objectives, and to the extent market quotations or other pricing indicators
(i.e. broker quotes) are available, these investments are considered Level 1 or
2 assets in line with ASC Topic 820.
Revenue Recognition
The Company recognizes revenue in accordance with Topic 606, which requires the
Company to recognize revenues when control of the promised goods or services is
transferred to customers at an amount that reflects the consideration to which
the Company expects to be entitled to in exchange for those goods or services.
The Company recognizes revenue based on the five criteria for revenue
recognition established under Topic 606: 1) identify the contract, 2) identify
separate performance obligations, 3) determine the transaction price, 4)
allocate the transaction price among the performance obligations, and 5)
recognize revenue as the performance obligations are satisfied.
The Company records interest income on an accrual basis and recognizes it as
earned in accordance with the contractual terms of the loan agreement and
underlying debt instrument, to the extent that such amounts are expected to be
collected. Debt investments are placed on non-accrual status when it is probable
that principal, interest or fees will not be collected according to contractual
terms. When a debt investment is placed on non-accrual status, the Company
ceases to recognize interest and fee income until the portfolio company has paid
all principal and interest due or demonstrated the ability to repay its current
and future contractual obligations to the Company. The Company may not apply the
non-accrual status to a loan where the investment has sufficient collateral
value to collect all of the contractual amount due and is in the process of
collection. Interest collected on non-accrual investments are generally applied
to principal.
Recent Accounting Pronouncements
We have implemented all new pronouncements that are in effect and that may
impact our consolidated financial statements and we do not believe that there
are any other new accounting pronouncements that have been issued that might
have a material impact on our consolidated financial statements or results of
operations.
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