MYCB 10-Q
My City Builders, Inc. (MYCB)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One) | |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended | |
Or | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from ____________ to ________________ | |
Commission file number:
(Exact name of registrant as specified in its charter) |
| ||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
| Emerging growth company | ||
If an emerging growth company, indicate by a check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of March 13,2025, there were
TABLE OF CONTENTS
| Page No. |
| ||
| ||||
|
| |||
F-1 | ||||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4 |
| ||
10 |
| |||
10 | ||||
|
|
| ||
| ||||
|
|
| ||
| 11 |
| ||
| 11 |
| ||
| 11 |
| ||
| 11 |
| ||
| 11 |
| ||
| 11 |
| ||
12 | ||||
| 2 |
| Table of Contents |
FORWARD LOOKING STATEMENTS
This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.
Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risks Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended July 31, 2024, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q, and information contained in other reports that we file with the SEC. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.
We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
All references in this Form 10-Q to the “Company,” “My City Builders,” “we,” “us,” “our” and words of like import relate to My City Builders, Inc. and its wholly-owned subsidiary, RAC Real Estate Acquisition Corp., a Wyoming corporation, unless the context indicates otherwise.
| 3 |
| Table of Contents |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
My City Builders, Inc.
Index to Unaudited Interim Condensed Consolidated Financial Statements
January 31, 2025
|
| Page |
|
|
|
|
|
Condensed Consolidated Balance Sheets as of January 31, 2025 and July 31, 2024 (Unaudited) |
| F-2 |
|
|
|
|
|
| F-3 |
| |
|
|
|
|
| F-4 |
| |
|
|
|
|
| F-5 |
| |
|
|
|
|
Notes to Unaudited Condensed Consolidated Financial Statements |
| F-6 |
|
| F-1 |
| Table of Contents |
My City Builders, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
|
| January 31, |
|
| July 31, |
| ||
|
| 2025 |
|
| 2024 |
| ||
ASSETS |
|
|
|
|
|
| ||
Current Assets |
|
|
|
|
|
| ||
Cash |
| $ |
|
| $ |
| ||
Prepaid expenses |
|
|
|
|
|
| ||
Accounts receivable |
|
|
|
|
|
| ||
Homes inventory for sales |
|
|
|
|
|
| ||
Total Current Assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Real estate property and equipment, net |
|
|
|
|
|
| ||
TOTAL ASSETS |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDES' EQUITY |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| $ |
|
| $ |
| ||
Loan payable - current portion |
|
|
|
|
|
| ||
Loans payable, related party |
|
|
|
|
|
| ||
Due to related parties |
|
|
|
|
|
| ||
Bank borrowings - current portion, net |
|
|
|
|
|
| ||
Total Current Liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Bank borrowings, net |
|
|
|
|
|
| ||
Loan payable |
|
|
|
|
|
| ||
TOTAL LIABILITIES |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Stockholders' Equity |
|
|
|
|
|
|
|
|
Preferred stock: |
|
|
|
|
|
| ||
Series A preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Additional paid in capital |
|
|
|
|
|
| ||
Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
Equity attributable to stockholders of My City Builders, Inc. |
|
|
|
|
|
| ||
Deficit attributable to noncontrolling interests |
|
| ( | ) |
|
| ( | ) |
Total Stockholders' Equity |
|
|
|
|
|
| ||
TOTAL LIABILITIES AND STOCKHOLDES' EQUITY |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-2 |
| Table of Contents |
My City Builders, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| January 31, |
|
| January 31, |
| ||||||||||
|
| 2025 |
|
| 2024 |
|
| 2025 |
|
| 2024 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Rental income |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of rental homes |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Depreciation |
|
|
|
|
|
|
|
|
|
|
|
| ||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Professional fees |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income and expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss on investment |
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||
Interest expense - related party |
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||
Interest expense |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Total other expense |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Income taxes |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||
Net Loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Less: Net income (loss) attributable to noncontrolling interests |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
| ( | ) | |
Net loss attributable to stockholders of My City Builders, Inc. |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share of common stock |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Basic weighted average number of common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
| ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-3 |
| Table of Contents |
My City Builders, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
(Unaudited)
For the Three and Six Months ended January 31, 2025
|
| Series A |
|
|
|
|
|
| Additional |
|
|
|
| Total |
|
| Non - |
|
|
| ||||||||||||||||
|
| Preferred Stock |
|
| Common Stock |
|
| Paid in |
|
| Accumulated |
|
| Stockholders |
|
| controlling |
|
| Total |
| |||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity |
|
| interest |
|
| Equity |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance - July 31, 2024 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |||
Balance - October 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for settlement of debt-related party |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |||
Balance - January 31, 2025 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
| |||||||
For the Three and Six Months ended January 31,2024
|
| Series A |
|
|
|
|
|
|
|
| Additional |
|
|
|
|
| Total Stockholders |
|
| Non - |
|
| Total |
| ||||||||||||
|
| Preferred Stock |
|
| Common Stock |
|
| Paid in |
|
| Accumulated |
|
| Equity |
|
| controlling |
|
| Equity |
| |||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| (Deficit) |
|
| interest |
|
| (Deficit) |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance - July 31, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |||
Balance - October 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for settlement of debt-related party |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| ( | ) | |
Balance - January 31, 2024 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
| |||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-4 |
| Table of Contents |
My City Builders, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| Six Months Ended |
| |||||
|
| January 31, |
| |||||
|
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
| ||
Amortization of debt discount |
|
|
|
|
|
| ||
Impairment loss on investment |
|
|
|
|
|
| ||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Prepaid expenses |
|
| ( | ) |
|
|
| |
Accounts receivable |
|
|
|
|
|
| ||
Accrued interest income |
|
|
|
|
|
| ||
Accounts payable and accrued liabilities |
|
| ( | ) |
|
| ( | ) |
Deferred rental revenue |
|
|
|
|
|
| ||
Homes inventory cost for sales |
|
| ( | ) |
|
|
| |
Accrued interest - related party |
|
|
|
|
|
| ||
Due to related parties |
|
|
|
|
|
| ||
Net cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Payments for construction |
|
| ( | ) |
|
| ( | ) |
Purchases of property and equipment |
|
| ( | ) |
|
|
| |
Net cash used in investing activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from bank borrowing |
|
|
|
|
|
| ||
Repayment of bank borrowing |
|
| ( | ) |
|
|
| |
Repayment of loans payable - related party |
|
| ( | ) |
|
|
| |
Advances from related parties |
|
|
|
|
|
| ||
Repayments to related parties |
|
| ( | ) |
|
| ( | ) |
Net cash provided by financing activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net change in cash |
|
| ( | ) |
|
| ( | ) |
Cash, beginning of period |
|
|
|
|
|
| ||
Cash, end of period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental cash flow information |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ |
|
| $ |
| ||
Cash paid for taxes |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental non-cash investing and financing activity: |
|
|
|
|
|
|
|
|
Recognition of loans payable as debt discount |
| $ |
|
| $ |
| ||
Issuance of loan agreements in exchange with due to related party |
| $ |
|
| $ |
| ||
Common stock issued for settlement of debt |
| $ |
|
| $ |
| ||
Assignment of debts between two related parties |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-5 |
| Table of Contents |
My City Builders, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 1 - ORGANIZATION AND BUSINESS OPERATIONS
My City Builders, Inc. (the “Company” or “My City Builders”) is a Nevada corporation incorporated on October 26, 2010, under the name Oconn Industries Corp. The Company’s name was changed on March 11, 2014, from Oconn Industries Corp. to Diamante Minerals, Inc., and to iMine Corporation on March 20, 2018 and to My City Builders, Inc on January 31, 2023.
In July 2022, the Company 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 the Company will buy and develop real estate for sale or rent of low-income housing. The Company plans 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.
On March 27, 2023, RAC, a wholly owned subsidiary of the Company entered into a Limited Liability Company Agreement dated effective March 27, 2023, (the “Agreement”) with, Frank Gillen, an individual (“Mr. Gillen”) and Michael Colvard, an individual (“Mr. Colvard”). The purpose of the LLC is to build 3-bedroom 2-bathroom single-family low-income homes in Gadsden Alabama. On May 05, 2023, Mr. Colvard’s construction agreement with the LLC was terminated and Mr. Colvard transferred his
As a result of the Agreement, RAC, formed a limited liability company called RAC Gadsden, LLC (“Gadsden”) incorporated in the state of Alabama. Gadsden will continue until terminated pursuant to the Agreement or as provided for under the laws of Alabama. RAC owns
Share Exchange and Reorganization
On July 1, 2022, the Company entered into an Agreement and Plan of Reorganization dated June 30, 2022 with RAC, and the shareholders of RAC, namely Frank Gillen, Francis Pittilloni, and Yolanda Goodell (the “Shareholders”), whereby the Company issued to the Shareholders a combined
Recapitalization
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.
| F-6 |
| Table of Contents |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Presentation of Interim Information
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and with Rule 8-03 of Regulation S-X promulgated by the Securities and Exchange Commission. Accordingly, the consolidated financial statements do not include all of the information and footnotes required by US GAAP for complete financial statements. Notes to the unaudited interim condensed consolidated financial statements that would substantially duplicate the disclosures contained in the audited consolidated financial statements for the year ended July 31, 2024, have been omitted. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the footnotes thereto for the fiscal year ended July 31, 2024, included within the Company’s Annual Report on Form 10-K.
In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the consolidated financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year.
Principles of Consolidation
The consolidated financial statements include the accounts of My City Builders and its subsidiaries. Intercompany transactions and balances have been eliminated.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires 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 financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s periodic filings with the SEC include, where applicable, disclosures of estimates, assumptions, uncertainties and markets that could affect the financial statements and future operations of the Company.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid investments with remaining maturities of less than ninety days at the date of purchase. We maintain cash and cash equivalent balances with financial institutions that exceed federally insured limits. We have not experienced any losses related to these balances, and we believe the credit risk to be minimal. The Company does not have any cash equivalents.
Fair Value Measurements
The Company measures the fair value of financial assets and liabilities based on US GAAP guidance which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
| F-7 |
| Table of Contents |
FASB ASC 820, “Fair Value Measurements” defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. It requires that an entity measure its financial instruments to base fair value on exit price, maximize the use of observable units and minimize the use of unobservable inputs to determine the exit price. It establishes a hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy increases the consistency and comparability of fair value measurements and related disclosures by maximizing the use of observable inputs and minimizing the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the assets or liabilities based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy prioritizes the inputs into three broad levels based on the reliability of the inputs as follows:
| ·
| Level 1 - Inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Valuation of these instruments does not require a high degree of judgment as the valuations are based on quoted prices in active markets that are readily and regularly available. |
|
|
|
| ·
| Level 2 - Inputs other than quoted prices in active markets that are either directly or indirectly observable as of the measurement date, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
|
|
|
| ·
| Level 3 - Valuations based on inputs that are unobservable and not corroborated by market data. The fair value for such assets and liabilities is generally determined using pricing models, discounted cash flow methodologies, or similar techniques that incorporate the assumptions a market participant would use in pricing the asset or liability. |
Financial instruments, including cash, accounts receivable, home inventory for sales, accounts payable and accrued liabilities, loan payable, bank borrowings and due to related parties, are carried at amortized cost. As of January 31, 2025, and July 31, 2024, the carrying amounts of financial instruments, approximated to their fair values due to the short-term maturity of these instruments.
Long term investment
The investments for which the Company has the ability to exercise significant influence are accounted for under the equity method. Under the equity method, the Company initially records its investment at cost. The difference between the cost of the equity investment and the amount of the underlying equity in the net assets of the equity investee is recognized as equity method goodwill or as an intangible asset as appropriate.
Real Estate Property and equipment
Real estate properties and equipment are stated at cost less accumulated depreciation. We capitalize all costs incurred to acquire, develop, construct, renovate and improve real estate property as part of major repair and maintenance programs, including interest and property taxes incurred during the construction period. We expense routine repair and maintenance costs as incurred. Depreciation is calculated using the straight-line over the estimated useful lives which are reviewed periodically and generally have the following ranges: Home for rent:
Homes inventory for sales
Homes inventory for sales are the homes that Company intended to sell. The homes inventory for sales are stated at lower cost or net realizable value, with cost and net realizable value determined by the specific identification of each home. The costs include initial purchase costs, title cost, restoration and repairs costs. The Company reviews inventory for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the carrying value of inventory may not be recoverable.
Impairment of Long-Lived Assets
Long-lived assets with finite lives, primarily investments, real estate inventories, property, and equipment, including real estate properties held for lease, and operating lease right-of-use assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value.
| F-8 |
| Table of Contents |
Lessor accounting – operating leases
We account for the revenue from our lease contracts by utilizing the single component accounting policy. This policy requires us to account for, by class of underlying asset, the lease component and non-lease component(s) associated with each lease as a single component if two criteria are met:
| (i) | the timing and pattern of transfer of the lease component and the non-lease component(s) are the same; and |
| (ii) | the lease component would be classified as an operating lease if it were accounted for separately. |
Lease components consist primarily of fixed rental payments, which represent scheduled rental amounts due under our leases. Non-lease components consist primarily of tenant recoveries representing reimbursements of rental operating expenses, including recoveries for utilities, repairs and maintenance and common area expenses.
If the lease component is the predominant component, we account for all revenues under such lease as a single component in accordance with the lease accounting standard. Conversely, if the non-lease component is the predominant component, all revenues under such lease are accounted for in accordance with the revenue recognition accounting standard. Our operating leases qualify for the single component accounting, and the lease component in each of our leases is predominant. Therefore, we account for all revenues from our operating leases under the lease accounting standard and classify these revenues as rental income.
We commence recognition of rental income related to the operating leases at the date the property is ready for its intended use by the tenant and the tenant takes possession or controls the physical use of the leased asset. Income from rentals related to fixed rental payments under operating leases is recognized on a straight-line basis over the respective operating lease terms. Amounts received currently but recognized as revenue in future periods are classified in other liabilities in our consolidated balance sheets.
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:
| (i) | Identify the contract, or contracts, with a tenant; |
| (ii) | Identify the performance obligations in the rental contract; |
| (iii) | Determine the transaction price; |
| (iv) | Allocate the transaction price to the performance obligations in the contract; |
| (v) | Recognize revenue when the Company satisfies a performance obligation. |
Rental income
The Company generated rental income from operating leases, which is accounted for under ASC 842. Operating lease revenue is generally recognized on straight-line basis over the terms of the lease agreements.
Cost of rental homes
The cost of rental homes are expenses directly related to rental homes, such as lawncare, maintenance and repairs, management fees, utilities, insurance, and property taxes.
| F-9 |
| Table of Contents |
General and administrative expenses
General and administrative expenses primarily consist of office expenses, travel, meals and entertainment and insurance.
Income Taxes
The Company provides income taxes under ASC 740, Accounting for Income Taxes. ASC 740 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse.
ASC 740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Deferred tax assets have been fully provided for by the Company as of January 31, 2025, and July 31, 2024, respectively.
The provisions of ASC 740-10-25, “Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The Company believes there were no uncertain tax positions as of January 31, 2025 and July 31, 2024, respectively.
During the six months ended January 31, 2025, the Company paid income tax of $
Concentrations of Credit Risk
The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and related party payables it will likely incur in the near future. The Company places its cash with financial institutions of high credit worthiness. At times, its cash balance with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
Net Loss per Share of Common Stock
The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted earnings per share of common stock are computed by dividing net earnings by the weighted average number of shares and potential shares outstanding during the period. Potential shares of common stock consist of shares to be issued taken into account the effect of dilutive instruments. As of January 31, 2025, and July 31, 2024, there were
Related Parties and Transactions
The Company identifies related parties, and accounts for, discloses related party transactions in accordance with ASC Topic 850, “Related Party Disclosures” and other relevant ASC standards.
Parties, which can be an entity or individual, are considered to be related if they have the ability, directly or indirectly, to control the Company or exercise significant influence over the Company in making financial and operational decisions. Entities are also considered to be related if they are subject to common control or common significant influence.
Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.
| F-10 |
| Table of Contents |
Segments
Operating segments are defined as components of an enterprise engaging in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company operates and manages its business as one operating segment and all of the Company’s revenues and operations are in United States.
Nonmonetary Transactions
The Company follows ASC 450, “Non-Monetary Transactions” and considers ASC 450-30 “Contingencies”, to report accounting for recognition homes inventory for sales and nonmonetary gain.
Reclassification
Certain accounts from prior periods have been reclassified to conform to the current period presentation.
Recent Accounting Pronouncements
The Company has implemented all new pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its consolidated financial statements or results of operations.
NOTE 3 - GOING CONCERN AND LIQUIDITY CONSIDERATIONS
The accompanying condensed 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 six months ended January 31, 2025, the Company incurred a net loss of $
The ability of the Company 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.
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.
NOTE 4 – HOMES INVENTORY FOR SALES
On October 4, 2022, the Company, through RAC Real Estate Acquisition Corp.(“RAC”), entered into a Limited Liability Company Agreement with Fix Pads Holdings, LLC ("Fix Pads"). As a result of the agreement, RAC and Fix Pads formed a limited liability company called RAC FIXPADS II, LLC (“LLC”), incorporated in the state of Delaware. The LLC has two members, RAC and Fix Pads, both providing an initial contribution to the LLC of $
| F-11 |
| Table of Contents |
In June 2024, the Company entered into two settlement agreements, which LLC and the other parties to transfer the title of forty-four (44) properties to the Company for selling and distribute the net proceed from the sales between the parties. According to the terms and condition of the settlement agreements, the Company shall pay the title search cost, taxes, lien expenses, and $
During the year ended July 31, 2024, the Company repaid $
During the year ended July 31, 2024, the Company obtained Quitclaim Deed Certificate and the official fair value reports of properties from an independent firm based on sales comparison and secondary sales and recognized the value of twenty-nine (29) properties based on the valuation reports and physical condition of the homes. Some of the homes must be remodelled, therefore its valuation was based on land price or secondary sales and or value per Square Foot. Those valuations were not more than sales comparison price.
During the six months ended January 31, 2025, the Company acquired one home for $
On November 26, 2024, The Company entered into an interest purchase agreement with Frank Campanaro in connection with settlement agreement dated June 2024 for
As of January 31, 2025, and July 31, 2024, homes inventory for sales consist of as follows:
Nonmonetary gain recognized of 29 properties |
| $ |
| |
Title cost paid in July 2024 |
|
|
| |
Balance of 29 properties as of July 31, 2024 |
|
|
| |
|
|
|
|
|
Transaction in fiscal year 2025 |
|
|
|
|
Cost of restoration and repairs |
|
|
| |
Purchased 50% interest and right of one property |
|
|
| |
Purchased one property for sales |
|
|
| |
Balance of 30 properties as of January 31, 2025 |
| $ |
|
| F-12 |
| Table of Contents |
NOTE 5 –REAL ESTATE PROPERTY AND EQUIPMENT, NET
As of January 31, 2025, and July 31, 2024, property and equipment consist of as follows;
|
| January 31, |
|
| July 31, |
| ||
|
| 2025 |
|
| 2024 |
| ||
Homes |
| $ |
|
| $ |
| ||
Lands |
|
|
|
|
|
| ||
Construction in progress |
|
|
|
|
|
| ||
RV travel trailer |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
|
| $ |
|
| $ |
| ||
During the six months ended January 31, 2025, three (3) homes were completed.
As of January 31, 2025, the construction in progress consists of the cost of titles and construction expenses for three (3) homes which have not been completed.
As of January 31, 2025, the Company had eleven (11) completed homes and has entered into eight (8) separate lease agreements with monthly lease payments of a range from $
During the six months ended January 31, 2025, and 2024, the Company recorded a depreciation expense of $
NOTE 6 - RELATED PARTY TRANSACTIONS
During the six months ended January 31, 2024, one related party assigned $
During the six months ended January 31, 2025, and 2024, the Company's shareholders paid operating expenses of $
During the six months ended January 31, 2025, and 2024, the Company’s related parties advanced $
During the six months ended January 31, 2025, and 2024, the Company’s related parties advanced $
During the six months January 31, 2025, and 2024, the Company’s Board of Directors approved the settlement of $
During the six months ended January 31, 2025, and 2024, the Company allocated interest of $
As of January 31, 2025, and July 31, 2024, the Company had due to related parties of $
| F-13 |
| Table of Contents |
NOTE 7 – BANK BORROWINGS
As of January 31, 2025, and July 31,2024, bank borrowings consist, as follows;
|
| Principal |
|
| Maturity |
| Interest |
|
| January 31 |
|
| July 31, |
| ||||
|
| Amount |
|
| date |
| Rate |
|
| 2025 |
|
| 2024 |
| ||||
Loan dated October 27, 2023 |
| $ |
|
|
|
| % |
| $ |
|
| $ |
| |||||
Loan dated October 27, 2023 |
|
|
|
|
|
| % |
|
|
|
|
|
| |||||
Loan dated November 3, 2023 |
|
|
|
|
|
| % |
|
|
|
|
|
| |||||
Loan dated November 3, 2023 |
|
|
|
|
|
| % |
|
|
|
|
|
| |||||
Loan dated November 3, 2023 |
|
|
|
|
|
| % |
|
|
|
|
|
| |||||
Loan dated November 3, 2023 |
|
|
|
|
|
| % |
|
|
|
|
|
| |||||
Loan dated November 3, 2023 |
|
|
|
|
|
| % |
|
|
|
|
|
| |||||
Loan dated July 26, 2024 |
|
|
|
|
|
| % |
|
|
|
|
|
| |||||
Loan dated July 26, 2024 |
|
|
|
|
|
| % |
|
|
|
|
|
| |||||
Loan dated July 26, 2024 |
|
|
|
|
|
| % |
|
|
|
|
|
| |||||
Loan dated July 26, 2024 |
|
|
|
|
|
| % |
|
|
|
|
|
| |||||
Total loans payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: unamortized debt discount |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Less: current portion of loans payable |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Long -term loans portion |
|
|
|
|
|
|
|
|
|
|
| $ |
|
| $ |
| ||
Loans dated October 27, 2023
The monthly payment of $
During the six months ended January 31, 2025, and 2024, the Company borrowed $
Loans dated November 3, 2023
These are construction loans (pre-mortgages) that are expected to convert to mortgage loans once the homes are completed.
During the six months ended January 31, 2025, and 2024, the Company borrowed $
Loans dated July 26, 2024
On July 26, 2024, the Company’s Interim Chief Executive Officer (ICEO) obtained four loans (totally $
| F-14 |
| Table of Contents |
During the six months ended January 31, 2025, the Company paid principal of $
During the six months ended January 31, 2025, the Company allocated interest of $
The following table outlines maturities of our long-term loans payable, as of January 31, 2025:
|
| January 31 |
| |
|
| 2025 |
| |
Year ending July 31, |
|
|
| |
Remaining of 2025 |
| $ |
| |
2026 |
|
|
| |
2027 |
|
|
| |
2028 |
|
|
| |
2029 |
|
|
| |
Thereafter |
|
|
| |
|
|
|
| |
Imputed interest |
|
| ( | ) |
|
| $ |
| |
NOTE 8 – LOANS PAYABLE - RELATED PARTY
As of January 31, 2025, loans payable – related party consist of as follows;
|
| Principal |
|
| Maturity |
| Interest |
|
| January 31, |
|
| July 31, |
| ||||
|
| Amount |
|
| date |
| Rate |
|
| 2024 |
|
| 2024 |
| ||||
Loan dated December 1, 2023 |
| $ |
|
|
|
| % |
| $ |
|
| $ |
| |||||
Loan dated December 1, 2023 |
| $ |
|
|
|
| % |
|
|
|
|
|
| |||||
Total loans payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Less: current portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) | |
Long -term loans portion |
|
|
|
|
|
|
|
|
|
|
| $ |
|
| $ |
| ||
During the six months ended January 31, 2024, one related party converted $
The monthly payment of $
On August 1, 2024, the Company paid and settled the outstanding principal balance of $
| F-15 |
| Table of Contents |
NOTE 9 – LOAN PAYABLE
On July 31, 2024, the Company purchased land for the purpose of future construction of duplex apartments in amount of $
During the six months ended January 31, 2025, the Company allocated interest of $
As of January 31, 2025, and July 31, 2024, the Company had principal due of $
NOTE 10 - EQUITY
Authorized Preferred Stock
The Company has authorized
Series A Preferred stock
The Company has designated
| · | The Series A Preferred Shares share in any dividends pari passu with the holders of common stock; |
|
|
|
| · | The Series A Preferred Shares have a liquidation preference equal to $ |
|
|
|
| · | Each share of Series A Preferred Stock entitles the holder to 10 votes on any matter presented to the holders of the Common Stock: |
|
|
|
| · | |
|
|
|
| · | The Company has no right to redeem the shares; and |
As of January 31, 2025, and July 31, 2024, the Company had
Authorized Common Stock
The Company has authorized
During the six months ended January 31, 2025, the Company issued
As of January 31, 2025, and July 31, 2024, the Company had
| F-16 |
| Table of Contents |
NOTE 11 – CONCENTRATION
As of January 31, 2025, and July 31, 2024, and for six months ended January 31, 2025, and 2024, customer concentrations (more than 10%) were as follows:
Revenue -rental income
|
| Percentage of Revenue |
| |||||
|
| For Six Months ended |
| |||||
|
| January 31, |
| |||||
|
| 2025 |
|
| 2024 |
| ||
Tenant A |
|
| % |
|
| % | ||
Tenant B |
|
| % |
|
| % | ||
Tenant C |
|
| % |
|
| % | ||
Tenant D |
|
| % |
|
| % | ||
Tenant E |
|
| % |
|
|
| ||
Tenant F |
|
| % |
|
|
| ||
Tenant G |
|
| % |
|
|
| ||
Tenant H |
|
| % |
|
|
| ||
|
|
|
|
|
|
|
|
|
Total (as a group) |
|
| % |
|
| % | ||
Accounts receivable
The rental properties are managed by a management company, therefore
NOTE 12 - SUBSEQUENT EVENTS
Management has evaluated subsequent events through the date these financial statements were available to be issued. Based on our evaluation no material events have occurred that require disclosure, except as follows
On February 27,2025, the Company acquired a piece of land for construction of new residential homes for amount of $
| F-17 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
We were formerly classified as a shell company and have since transitioned into active operations following the acquisition of RAC Real Estate Acquisition Corp. ("RAC"). We no longer maintain the status of a shell company due to these developments.
In July 2022, we acquired RAC, a Wyoming-based corporation, which is now a wholly owned subsidiary of the Company. Through RAC, the Company focuses on real estate transactions, particularly the acquisition, development, and sale or rental of low-income housing. Our investment approach is segmented into three primary areas:
| · | Acquiring, refurbishing, and selling traditional foreclosures; |
| · | Purchasing, developing, and renting properties in "Land Banks," which typically comprise over 100 homes or lots in a single location; |
| · | Acquiring, refurbishing, or developing homes available through HECM (Home Equity Conversion Mortgage) pools. |
On January 31, 2023, the Company changed its corporate name to My City Builders, Inc., through the merger of the Company with its wholly owned subsidiary, My City Builders, Inc., a Nevada corporation (the “Subsidiary”). Pursuant to an agreement and plan of merger between the Company and the Subsidiary, the Subsidiary was merged with and into the Company and the Company’s name was changed to My City Builders, Inc. The only change to the Company’s articles of incorporation was the change of the Company’s corporate name. Pursuant to the Nevada Revised Statutes (NRS) 92A.180, the merger did not require stockholder approval. On April 26, 2023, FINRA notified the Company that their review of our corporate name change, disclosed in our 8-K filed on February 1, 2023, with the SEC, was complete and that the announcement of the merger, name and symbol change for the Company had been announced on their Daily List on April 26, 2023. The corporate action took effect at the open of business on April 27, 2023, in the open market. As a result of this corporate action the Company’s trading symbol is now MYCB.
On March 27, 2023, RAC, a wholly owned subsidiary of the Company entered into a Limited Liability Company Agreement dated effective March 27, 2023, (the “Agreement”) with, Frank Gillen, an individual (“Mr. Gillen”) and Michael Colvard, an individual (“Mr. Colvard”). The purpose of the LLC is to build 3-bedroom 2-bathroom single-family low-income homes in Gadsden Alabama. On May 05, 2023, Mr. Colvard’s construction agreement with RAC was terminated and Mr. Colvard transferred his 1% and withdrew as a member and manager of the LLC.
On October 4, 2022, the Company, through RAC, entered into a Limited Liability Company Agreement with Fix Pads Holdings, LLC ("Fix Pads"). As a result of the agreement, RAC and Fix Pads formed a limited liability company called RAC FIXPADS II, LLC (“LLC”), incorporated in the state of Delaware. 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 one 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 up to 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. From the sale of each property by the LLC, the Company shall receive $13,000 and the average additional cash capital contribution per property. During the years ended July 31, 2024, and 2023, the Company invested $0 and $2,679,500 and recognized impairment loss of $ 947,500 and $1,732,000, respectively.
Since the acquisition of RAC, the Company, through our third-party vendor, has financed the clearance of 55 titles in the name of Fix Pads Holdings.
| 4 |
| Table of Contents |
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. The note had a 12% interest rate per annum payable of $672,960. Consideration for the note was paid in part by the Company in the amount of $328,626, net of prepayment interest and in part by a third-party investor in the amount of $328,626. On August 18, 2022, the Company issued a promissory note of $358,620. The note had a 12% interest rate per annum payable of $358,620 and was due on August 1, 2023. Consideration for the note was paid in part by the Company in the amount of $175,007, net of prepayment interest and in part by a third-party investor in the amount of $175,007.
During the year ended July 31, 2023, the Company collected principal of $444,325 and interest of $67,457, of which principal of $157,105 and interest of $28,133 (totaling $185,238) were collected on behalf of a third-party investor and recorded as accrued liabilities as of July 31, 2023. On July 23, 2024, the Company repaid outstanding due of $185,238.
On July 7, 2023, RAC filed an ongoing lawsuit with Fix Pad Holdings, therefore, no further interest income was recognized. During the years ended July 31, 2024, and 2023, the Company recorded interest income of $0 and $49,187, respectively.
On May 19, 2023, RAC filed a complaint for breach of two promissory notes entered into with Fix Pads Holdings, LLC and for injunctive relief in the 11th Judicial Circuit Court in Miami-Dade County Florida, as well as an emergency motion for temporary injunction enjoining Fix Pads Holdings, LLC from selling, transferring, conveying or otherwise disposing of any real property assets pledged as collateral in relation to the two promissory notes entered into between RAC and Fix Pads. In addition to the injunctive relief sought above, RAC is also seeking damages for breach of the promissory notes. After RAC filed and served the lawsuit, Fix Pads removed the lawsuit to the United States District Court for the Southern District of Florida on May 24, 2023. As such, the case is now proceeding in the Southern District of Florida. RAC has obtained temporary injunctive relief against Fix Pads.
On July 7, 2023, RAC filed a complaint for appointment of receiver, breach of Limited Liability Company Agreement, and breach of fiduciary duty in the 11th Judicial Circuit Court of Miami-Dade County, Florida against Fix Pads Holdings LLC, FixPads Management, LLC and RAC FixPads II, LLC. RAC seeks a receiver to be appointed to wind up the real property assets of RAC FixPads II, LLC and for damages for breach of the joint venture agreement.
In June 2024, the parties entered into two settlement agreements, which FixPads Holdings LLC and the other Defendants agreed to transfer the title of 44 properties to the Company.
Pursuant to title search and settlement of taxes and due related to properties, the Company proceeded to obtain the Quitclaim Deed Certificates on 29 properties. As of the date of this report, 29 Quitclaim Deed Certificates were issued. RAC has started the renovation and completion of the properties since July 2024. All twenty-nine homes will be immediately placed for sale once fully renovated.
The Company obtained the official fair value reports of properties from an independent firm based on sales comparison and secondary sales and recognized the value of 29 properties based on the valuation reports and physical condition of the homes. Some of the homes must be remodelled, therefore its valuation was based on land price or secondary sales and or value per Square Foot. Those valuations were not more than sales comparison price and have been disclosed as nonmonetary gain in the Company’s Financial Statements.
On April 25, 2024, RAC finalized the purchase of two additional lots in Gadsden, Alabama bringing the total properties owned in East Gadsden to twenty-two. This decision stemmed from the ongoing construction of three homes by RAC on the same street, slated for completion. With the aim of bolstering rental demand, RAC has started construction on these newly acquired lots. The homes are 3-bedroom 2-bathroom single family homes with under roof of 1270 square feet. The plan for Gadsden Alabama is to build new low-income single-family homes for rent.
On July 31, 2024, RAC Gadsden LLC entered into a land purchase agreement in Glencoe Alabama. Glencoe is the neighbouring town to Gadsden, and the Company plans to build seven to eight duplex apartments on the parcel of land during the calendar year of 2025.
| 5 |
| Table of Contents |
On October 18, 2024, RAC finalized the purchase of one home in Laurel Mississippi in amount of $8,021. The Company plans to renovate the home and to sell it.
On November 26, 2024, The Company entered into an interest purchase agreement with Frank Campanaro in connection with settlement agreement dated June 2024 for 50% ownership of a property located at 1320 N 5th Avenue, Laurel, MS in amount of $41,565 in cash. Pursuant to acquisition agreement, the Company’s ownership of property was increased to 100%.
As of January 31, 2025, RAC has completed the construction of eleven homes with three additional homes under construction in East Gadsden. Of the eleven completed properties eight homes have been leased with monthly lease payments ranging from $1,100 to $1,250, each for a period of one year for each home leased.
On January 22, 2025, and January 17, 2024, the Company’s Board of Directors approved the settlement of $ 1,716,000 and $2,850,000 due to one related party in exchange for an issuance of 4,290,000 and 11,400,000 shares of common stock, respectively. The Company valued the issuance of 4,290,000 and 11,400,000 shares of common stock at market price of $0.35 and $0.20 per share on settlement date and recognized gain of $214,500 and $570,000, respectively. The gain on settlement of debts to related party was added in additional paid in capital.
On February 27,2025, the Company acquired a second piece of land in Gadsden, Alabama for construction of new residential homes for $75,000. This land acquisition is next to the land purchased by the Company on July 31, 2024, and the plan is to build up to thirty single family Garden Homes as a “Phase Two” construction project once the seven to eight duplex apartments has been completed on the initial parcel of land purchased in July of 2024.
Results of Operations
The following summary of our results of operations should be read in conjunction with our unaudited consolidated financial statements for the six months ended January 31, 2025, and 2024, which are included herein.
Our operating results for the six months ended January 31, 2025, and 2024, and the changes between those periods for the respective items are summarized as follows:
Three Months Ended January 31, 2025, compared to the Three Months ended January 31,2024
|
| Three Months Ended |
|
|
|
| ||||||
|
| January 31, |
|
|
|
| ||||||
|
| 2025 |
|
| 2024 |
|
| Change |
| |||
Revenue |
| $ | 29,743 |
|
| $ | 13,599 |
|
| $ | (16,144 | ) |
Operating expenses |
|
| 77,140 |
|
|
| 73,961 |
|
|
| 3,179 |
|
Other expenses |
|
| 29,774 |
|
|
| 960,104 |
|
|
| (930,330 | ) |
Income tax |
|
| 1,128 |
|
|
| - |
|
|
| 1,128 |
|
Net loss |
| $ | 78,299 |
|
| $ | 1,020,466 |
|
| $ | (942,167 | ) |
For the three months ended January 31, 2025, and 2024, we generated revenue from rent income of $29,743 and $13,599, respectively.
We had a net loss of $78,299 for the three months ended January 31, 2025, and $1,020,466 for the three months ended January 31, 2024. The decrease in net loss of $942,167 was due to an increase in operating expenses of $3,179 and a decrease in other expenses of $930,330 offset by an increase in revenue of $16,144.
Operating expenses for the three months ended January 31, 2025, and 2024 were $77,140 and $73,961, respectively. For the three months ended January 31, 2025, and 2024, the operating expenses were primarily attributed to professional fees of $38,854 and $60,218, general and administrative expenses of $14,615 and $4,550, depreciation expenses of $17,415 and $6,342, and cost of rental homes of $6,256 and $2,851 respectively. The cost of rental homes was for rented homes such as lawncare, maintenance and repairs, management fees, utilities, insurance and property taxes.
| 6 |
| Table of Contents |
Other expenses for the three months ended January 31, 2025, and 2024, represent interest expenses -related party of $0 and $8,815 for granted loans, interest expenses of $29,774 and $3,789 for banks borrowings and loan payable to third party and impairment loss on investment of $0 and $947,500, respectively.
Income tax for three months ended January 31, 2025, is related to payment income tax of $1,128 for year ended July 31, 2024.
Six Months Ended January 31, 2025, compared to the Six Months ended January 31,2024
|
| Six Months Ended |
|
|
|
| ||||||
|
| January 31, |
|
|
|
| ||||||
|
| 2025 |
|
| 2024 |
|
| Change |
| |||
Revenue |
| $ | 55,271 |
|
| $ | 19,768 |
|
| $ | (35,503 | ) |
Operating expenses |
|
| 157,232 |
|
|
| 149,449 |
|
|
| 7,783 |
|
Other expenses |
|
| 49,695 |
|
|
| 963,362 |
|
|
| (913,667 | ) |
Income tax |
|
| 1,128 |
|
|
| - |
|
|
| 1,128 |
|
Net loss |
| $ | 152,784 |
|
| $ | 1,093,043 |
|
| $ | (940,259 | ) |
For the six months ended January 31, 2025, and 2024, we generated revenue from rent income of $55,271 and $19,768, respectively.
We had a net loss of $152,784 for the six months ended January 31, 2025, and $1,093,043 for the six months ended January 31, 2024. The decrease in net loss of $940,259 was due to an increase in operating expenses of $7,783 and a decrease in other expenses of $913,667 offset by an increase in revenue of $35,503.
Operating expenses for the six months ended January 31, 2025, and 2024 were $157,232 and $149,449, respectively. For the six months ended January 31, 2025, and 2024, the operating expenses were primarily attributed to professional fees of $90,101 and $117,754, general and administrative expenses of $21,916 and $14,355, depreciation expenses of $32,366 and $12,270, and cost of rental homes of $12,849 and $5,070 respectively. The cost of rental homes was for rented homes such as lawncare, maintenance and repairs, management fees, utilities, insurance and property taxes.
Other expenses for the six months ended January 31, 2025, and 2024, represent interest expenses -related party of $0 and $12,073 for granted loans, interest expenses of $49,695 and $3,789 for banks borrowings and loan payable to third party and impairment loss on investment of $0 and $947,500, respectively.
Income tax for six months ended January 31, 2025, is related to payment income tax of $1,128 for year ended July 31, 2024.
Balance Sheet Data
|
| January 31, |
|
| July 31, |
|
|
|
| |||
|
| 2025 |
|
| 2024 |
|
| Change |
| |||
Cash |
| $ | 17,349 |
|
| $ | 20,245 |
|
| $ | (2,896 | ) |
Working capital |
| $ | 1,392,613 |
|
| $ | 64,205 |
|
| $ | 1,328,408 |
|
Total current assets |
| $ | 1,916,559 |
|
| $ | 1,635,857 |
|
| $ | 280,702 |
|
Total current liabilities |
| $ | 523,946 |
|
| $ | 1,571,652 |
|
| $ | (1,047,706 | ) |
Stockholders' Equity |
| $ | 2,724,896 |
|
| $ | 1,161,680 |
|
| $ | 1,563,216 |
|
| 7 |
| Table of Contents |
As of January 31, 2025, our current assets were $1,916,559 and our current liabilities were $523,946 which resulted in working capital of $1392,613. As of January 31, 2025, current assets were comprised of $17,349 in cash, $1,124 in accounts receivable, $1,875,367 in homes inventory for sales, compared to $20,245 in cash, $2,607 in accounts receivable, $1,613,005 in homes inventory for sales as of July 31,2024.
As of January 31, 2025, current liabilities were comprised of $66,742 in accounts payable and accrued liabilities, $25,000 loan payable-current portion and $432,204 in bank borrowings, compared to $79,563 in accounts payable and accrued liabilities, $1,106,000 in due to related parties, $25,000 loan payable-current portion, $28,500 in loans payable -related party and $332,589 in bank borrowings as of July 31, 2024.
Cash Flow Data
|
| Six Months Ended |
|
|
|
| ||||||
|
| January 31, |
|
|
|
| ||||||
|
| 2025 |
|
| 2024 |
|
| Change |
| |||
Cash used in operating activities |
| $ | (415,348 | ) |
| $ | (102,645 | ) |
| $ | (312,703 | ) |
Cash used in investing activities |
| $ | (267,015 | ) |
| $ | (392,554 | ) |
| $ | 125,539 |
|
Cash provided by financing activities |
| $ | 679,467 |
|
| $ | 376,887 |
|
| $ | 302,580 |
|
Net change in cash during period |
| $ | (2,896 | ) |
| $ | (118,312 | ) |
| $ | 115,416 |
|
Cash Flows from Operating Activities
We have not generated positive cash flows from operating activities. For the six months ended January 31, 2025, net cash flows used in operating activities was $415,348, consisting of a net loss of $152,784, reduced by depreciation expenses of $32,366, amortization of debt discount of $1,489, accounts receivable of $1,483, and increased by accounts payable and accrued liabilities of $12,821, prepaid expenses of $22,719 and homes inventory cost for sales of $262,362.
For the six months ended January 31, 2024, net cash flows used in operating activities was $102,645, consisting of a net loss of $1,093043, reduced by impairment loss on investment of $947,500, depreciation expenses of $12,270, amortization of debt discount of $729, prepaid expenses of $10.000, accrued interest income of $265, deferred rent income of $170, accrued interest -related party of $4,453,due to related party of $16,889 and increased by accounts payable and accrued liabilities of $1,878
Cash Flows from Investing Activities
During the six months ended January 31, 2025, and 2024, the Company used $153,435 and $392,554 for payments of construction expenses and $13,000 and $0 for acquisition one RV travel trailer, respectively.
Cash Flows from Financing Activities
During the six months ended January 31, 2025, the Company received advance from a related party of $835,000, bank borrowings of $102,534 and repaid loans payable -related party of $28,500, bank borrowings of $4,567 and $225,000 to related parties.
During the six months ended January 31, 2024, the Company received advance from related parties of $457,700, bank borrowings of $264,998, and repaid $345,811 to related parties.
| 8 |
| Table of Contents |
Going Concern
Our consolidated financial statements have been prepared assuming that we 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 six months ended January 31, 2025, we incurred net loss of $152,784 and net cash used in operating activities of $415,348. As of January 31, 2025, we had an accumulated deficit of $2,172,616 and working capital of $1,392,613. In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management plans to raise necessary funding through equity and debt financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements. The ability of the Company is dependent upon, among other things, obtaining financing to continue operations and continue developing the business plan. The Company cannot give any assurance as to the ability to develop or operate profitably. 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.
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.
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:
| (i) | Identify the contract, or contracts, with a tenant; |
| (ii) | Identify the performance obligations in the rental contract; |
| (iii) | Determine the transaction price; |
| (iv) | Allocate the transaction price to the performance obligations in the contract; |
| (v) | Recognize revenue when the Company satisfies a performance obligation. |
Rental income
The Company generated rental income from operating leases, which is accounted for under ASC 842. Operating lease revenue is generally recognized on straight-line basis over the terms of the lease agreements.
Cost of rental homes
The cost of rental homes are expenses directly related to rental homes, such as lawncare, maintenance and repairs, management fees, utilities, insurance and property taxes.
Commitments and Contingencies
The Company follows ASC 450-20, “Loss Contingencies”, to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred, and the amount of the assessment can be reasonably estimated.
Recent Accounting Pronouncements
The Company has implemented all new pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its consolidated financial statements or results of operations.
Nonmonetary Transactions
The Company follows ASC 450, “Non-Monetary Transactions” and considers ASC 450-30 “Contingencies”, to report accounting for recognition homes inventory for sales and nonmonetary gain on settlement of lawsuit.
| 9 |
| Table of Contents |
Concentration
As of January 31, 2025, and July 31, 2024, and for six months ended January 31, 2025, and 2024, customer concentrations (more than 10%) were as follows:
Revenue -rental income
|
| Percentage of Revenue |
| |||||
|
| For Six Months ended |
| |||||
|
| January 31, |
| |||||
|
| 2025 |
|
| 2024 |
| ||
Tenant A |
|
| 11.94 | % |
|
| 14.28 | % |
Tenant B |
|
| 2.47 | % |
|
| 32.11 | % |
Tenant C |
|
| 4.01 | % |
|
| 38.01 | % |
Tenant D |
|
| 13.57 | % |
|
| 15.60 | % |
Tenant E |
|
| 13.92 | % |
|
| - |
|
Tenant F |
|
| 13.74 | % |
|
| - |
|
Tenant G |
|
| 14.11 | % |
|
| - |
|
Tenant H |
|
| 13.03 | % |
|
| - |
|
|
|
|
|
|
|
|
|
|
Total (as a group) |
|
| 86.78 | % |
|
| 100.00 | % |
Accounts receivable
The rental properties are managed by a management company, therefore 100% of accounts receivable is related to one customer on January 31, 2025 and July 31, 2024.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company, we have elected not to provide the disclosure required by this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation of the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”), as defined by Rules 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of January 31, 2025, the end of the period covered by this quarterly report on Form 10-Q. The Disclosure Controls evaluation was done under supervision and with the participation of management, including our chief executive officer and chief financial officer. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon this evaluation, our chief executive officer and chief financial officer, concluded that, due to the inadequacy of our internal controls over financial reporting and our limited internal audit function, our disclosure controls were not effective as of January 31, 2025, such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the president and treasurer, as appropriate, to allow timely decisions regarding disclosure.
Changes in Internal Control over Financial Reporting
As reported in our annual report on Form 10-K for the year ended July 31, 2024, management has determined that our internal controls contain material weaknesses due to the absence of segregation of duties, as well as lack of qualified accounting personnel and excessive reliance on third party consultants for accounting, financial reporting and related activities. Currently we have two principal executive officers, that serve as chief executive officer and chief financial officer, and directors of the company. Both executive officers do not have an accounting background which makes it unlikely that we will be able to implement effective internal controls over financial reporting in the near future.
During the period ended January 31, 2025, there was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| 10 |
| Table of Contents |
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
On March 23, 2023, RAC was awarded a judgement from the District Court in Clark County Nevada enabling the company to cancel common shares held in the name of HUI PING LIU. These shares were originally issued to HUI PING LIU for no consideration by our former CEO Daniel Tsai.
On May 19, 2023, RAC filed a complaint for breach of two promissory notes entered into with Fix Pads Holdings, LLC and for injunctive relief in the 11th Judicial Circuit Court in Miami-Dade County Florida, as well as an emergency motion for temporary injunction enjoining Fix Pads Holdings, LLC from selling, transferring, conveying or otherwise disposing of any real property assets pledged as collateral in relation to the two promissory notes entered into between RAC and Fix Pads. In addition to the injunctive relief sought above, RAC is also seeking damages for breach of the promissory notes. After RAC filed and served the lawsuit, Fix Pads removed the lawsuit to the United States District Court for the Southern District of Florida on May 24, 2023. As such, the case is now proceeding in the Southern District of Florida. RAC has obtained temporary injunctive relief against Fix Pads.
On July 7, 2023, RAC filed a complaint for appointment of receiver, breach of LLC agreement, and breach of fiduciary duty in the 11th Judicial Circuit Court of Miami-Dade County, Florida against Fix Pads Holdings LLC, FixPads Management, LLC and RAC FixPads II, LLC. RAC seeks a receiver to be appointed to wind up the real property assets of RAC FixPads II, LLC and for damages for breach of the joint venture agreement.
In June 2024, the parties entered into two settlement agreements, which FixPads Holdings LLC and the other defendants agreed to transfer the title of 44 properties to the Company.
Pursuant to title search and settlement of taxes and due related to properties, the Company proceeded to obtain the quitclaim deed certificate of 29 properties.
RAC has started the renovation and completion of the properties since July 2024. All twenty-nine homes will be immediately placed for sale once they are fully renovated.
On July 23, 2024, as part of the settlement agreements RAC paid $185,238.37 as part of the proceeds owed to Frank Campanero on the secured loans dated July 22, 2022, and August 18, 2022.
Item 1A. Risk Factors
As a “smaller reporting company,” we are not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On January 22, 2025, the Company issued 4,290,000 shares for the settlement due to a related party of $1,716,000.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
| 11 |
| Table of Contents |
Item 6. Exhibits.
The following exhibits are included as part of this report:
Exhibit Number |
| Description |
(31) |
| Rule 13a-14(a)/15d-14(a) Certification |
| Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer, | |
| ||
(32) |
| Section 1350 Certification |
| Section 906 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer | |
| ||
101* |
| Inline XBRL Document Set for the consolidated financial statements and accompanying notes in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q. |
104* |
| Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set. |
| 12 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| MY CITY BUILDERS, INC. | ||
| |||
Dated: March 17, 2025 | /s/ Yolanda Goodell | ||
| Yolanda Goodell | ||
|
| Interim Chief Executive Officer (Principal Executive Officer) | |
| 13 |