My City Builders, Inc 10-Q for FY2024 Q1
My City Builders, Inc. (MYCB)
About this 10-Q
My City Builders, Inc filed this 10-Q on December 1, 2023, covering the quarter ended October 31, 2023 (FY2024 Q1).
Headline figures
Quarter ended October 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $3950
- down 72.3% from $14.26K a year earlier
- Net loss
- $78.58K
- compared with a net loss of $22.2K a year earlier
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) |
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(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 December 1, 2023, there were
TABLE OF CONTENTS
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| 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, 2023, 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.
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
My City Builders, Inc.
Consolidated Balance Sheets
(Unaudited)
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ASSETS | ||||||||
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Loan receivable |
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Accrued interest income |
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Total Current Assets |
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Property and equipment, net |
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Investment |
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TOTAL ASSETS |
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LIABILITIES AND DEFICIT | ||||||||
Current Liabilities |
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Accounts payable and accrued liabilities |
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Due to related parties |
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Total Current Liabilities |
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Loans payable, net |
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TOTAL LIABILITIES |
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Deficit |
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Preferred stock: |
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Series A preferred stock |
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Common stock: |
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Additional paid in capital |
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Accumulated deficit |
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Deficit attributable to stockholders of My City Builders, Inc. |
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Noncontrolling interests |
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Total Deficit |
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TOTAL LIABILITIES AND DEFICIT |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
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My City Builders, Inc.
Consolidated Statements of Operations
(Unaudited)
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Interest income |
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Rental income |
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Operating expenses |
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General and administrative |
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Professional fees |
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Depreciation |
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Total operating expenses |
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Loss from operations |
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Other income and expense |
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Interest expense- related party |
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Total other expense |
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Loss before income taxes |
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Provision for income taxes |
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Net Loss |
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Less: Net loss attributable to noncontrolling interests |
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Net loss attributable to stockholders of My City Builders, Inc. |
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Basic and diluted loss per share of common stock |
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Basic weighted average number of common shares outstanding |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
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My City Builders, Inc.
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
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| Total |
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Balance - July 31, 2023 |
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Net loss |
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Balance - October 31, 2023 |
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Balance - July 31, 2022 |
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Net loss |
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Balance - October 31, 2022 |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
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| Table of Contents |
My City Builders, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net loss |
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Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
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Depreciation |
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Changes in operating assets and liabilities: |
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Prepaid expenses |
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Accrued interest income |
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Accounts payable and accrued liabilities |
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Deferred interest income |
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Due to related parties |
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Net cash (used in) provided by operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Investment |
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Advance on loan receivable |
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Collection of loan receivable |
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Payment for construction |
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Net cash used in investing activities |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from loans payable |
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Advances from related parties |
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Repayments to related parties |
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Net cash provided by financing activities |
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Net change in cash |
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Cash, beginning of period |
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Cash, end of period |
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Supplemental cash flow information |
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Cash paid for interest |
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Cash paid for taxes |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
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| Table of Contents |
My City Builders, Inc.
Notes to Unaudited 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
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 consolidated financial statements that would substantially duplicate the disclosures contained in the audited consolidated financial statements for the year ended July 31, 2023 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, 2023 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.
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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.
Fair Value Measurements
As defined in ASC 820, “Fair Value Measurements.” fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. 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:
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.
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 nonlease 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 nonlease 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. Nonlease 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 nonlease 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.
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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: 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.
Interest income
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 the principal.
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.
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 October 31, 2023 and July 31, 2023, there were
NOTE 3 - GOING CONCERN AND LIQUIDITY CONSIDERATIONS
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 three months ended October 31, 2023, the Company incurred a net loss of $
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| Table of Contents |
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.
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 – LOAN RECEIVABLE
On July 22, 2022, the Company received a promissory note, in the principal amount of $
On August 18, 2022, the Company issued the promissory note of $
During the three months ended October 31, 2023 and 2022, the Company recorded interest income of $
As of October 31, 2023 and July 31, 2023, the Company recorded loan receivable of $
NOTE 5 – PROPERTY AND EQUIPMENT, NET
As of October 31, 2023 and July 31, 2023, property and equipment consist of as follows;
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Homes |
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Construction in progress |
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Accumulated depreciation |
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As of October 31, 2023, the construction in progress consists of the cost of titles and construction for five (5) homes which have not been completed. Four (4) homes have been completed of which two have been leased and the remaining two completed are on the market for rent. The remaining five (5) homes under construction should be ready for lease in the second quarter during the year ended July 31, 2024.
As of October 31, 2023, the Company entered into two separate lease agreements with monthly lease payments of $
During the three months ended October 31, 2023, the Company recorded depreciation expense of $
| 11 |
| Table of Contents |
NOTE 6 – INVESTMENT
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 $
As of October 31, 2023 and July 31, 2023, the Company recorded investment of $947,500.
NOTE 7 - RELATED PARTY TRANSACTIONS
During the period ended October 31, 2022, the Company's shareholders paid operating expenses of $
During the three months ended October 31, 2023 and 2022, the Company’s related parties advanced $
During the three months ended October 31, 2023, the Company’s related parties advanced $
As of October 31, 2023 and July 31, 2023, the Company had due to related parties of $
NOTE 8 – LOANS PAYABLE
As of October 31, 2023, loans payable consist of as follows;
|
| October 31, |
|
|
|
|
|
|
| ||||
|
| 2023 |
|
| Interest rate |
|
| Maturity |
| Payment | |||
Loan dated October 26, 2023 |
| $ |
|
|
|
|
| ||||||
Loan dated October 26, 2023 |
|
|
|
|
|
|
| ||||||
Total loans payable |
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| |
Less: Unamortized debt discount |
|
| ( | ) |
|
|
|
|
|
|
|
| |
Total |
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| |
Less: current portion of loans payable |
|
|
|
|
|
|
|
|
|
|
| ||
Long-term loans payable |
| $ |
|
|
|
|
|
|
|
|
| ||
During the three months ended October 31, 2023, the Company had DSCR loans of $
* Monthly payment of $
| 12 |
| Table of Contents |
The following table outlines maturities of our long-term loans payable, as of October 31, 2023:
Year ending July 31, |
|
|
| |
Remaining of 2024 |
| $ |
| |
2025 |
|
|
| |
2026 |
|
|
| |
2027 |
|
|
| |
2028 |
|
|
| |
Thereafter |
|
|
| |
|
|
|
| |
Imputed interest |
|
| ( | ) |
Loan |
| $ |
| |
NOTE 9 - EQUITY
Authorized Preferred Stock
The Company has authorized
Series A Preferred stock
The Company has designated
As of October 31, 2023 and July 31, 2023, the Company had
Authorized Common Stock
The Company has authorized
As of October 31, 2023 and July 31, 2023, the Company had
As of October 31, 2023 and July 31, 2023, the Company had no options and warrants outstanding.
| 13 |
| Table of Contents |
NOTE 10 – LEGAL PROCEEDINGS
On March 23, 2023, RAC was awarded a judgement from the District Court in Clark County Nevada enabling the Company to cancel 10,000 common shares held in the name of Hui Ping Liu.
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 will now be 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 for 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.
On October 2, 2023, the parties participated in a global mediation concerning both lawsuits. The parties have reached a tentative verbal agreement on all material terms to resolve both lawsuits and are in the process of finalizing the agreement.
NOTE 11 - SUBSEQUENT EVENTS
Management has evaluated subsequent events through October 31, 2023 to the date on which the financial statements are available to be issued. Based on our evaluation no material events have occurred that require disclosure.
| 14 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
We were a former shell company. Since our acquisition of RAC and commencing operations, however, we are no longer a shell company.
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.
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.
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, (“FPH”). As a result of the agreement, RAC and FPH formed a limited liability company called RAC FIXPADS II, LLC (the “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 FPH, 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 Management LLC.
| 15 |
| Table of Contents |
The Agreement provides that additional capital contributions of the members will be made to the LLC as follows: (i) FPH 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 FPH 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 FPH; (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 the clearance of 55 titles in the name of Fix Pads Holdings, LLC. FPH has completed nine (9) homes with six (6) more under construction. Of the nine (9) homes completed, seven (7) homes have been sold in the LLC with two (2) still on the market for sale. Regarding the secured loans with FPH six (6) of the eleven (11) homes completed have been sold under the two promissory notes.
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. The Company’s new trading symbol is MYCB.
As of October 31, 2023, RAC has invested $2,679,500 into RAC FIXPADS II of which $2,300,000 was invested for the rehabilitation of homes held in the LLC and $379,500 has been wired to Title Vest to clear fifty-five (55) titles of taxes and any back fees owed to rehabilitate the homes for sell or rent. Currently, RAC has decided to cease further development with Fix Pads LLC & Fix Pads Holdings.
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 April 27, 2023, RAC closed on twenty (20) lots in Gadsden Alabama. RAC ordered and received the three (3) steel framed “pre-engineered” homes for the Gadsden Land Bank project. Based on increased labor costs with the steel framed homes along with high transportation costs RAC has decided to build traditional “stick built” homes in Gadsden Alabama. 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. As of October 31, 2023, RAC has completed the construction and received occupation permits on four (4) homes and is under construction on five (5) more out of the twenty (20) Gadsden properties. Two (2) of the completed homes have been rented with the other two (2) homes on the market for rent. The remaining five homes under construction are projected to be completed by the 2nd quarter of the July 31, 2024 year end.
| 16 |
| Table of Contents |
Results of Operations
Three Months Ended October 31, 2023 and 2022
For the three months ended October 31, 2023 and 2022, we generated revenue from interest income of $0 and $14,255 and revenue from rent income of $3,950 and $0, respectively.
For the three months ended October 31, 2023 and 2022, we incurred operating expense of $73,269 and $36,452, primarily professional fees, and interest expense – related parties of $9,258 and $0, resulting in a net loss of $78,577 or ($0.13) and $22,197 or ($0.04) per share (basic and diluted), respectively.
Liquidity and Capital Resources
The following summarizes our change in working capital from July 31, 2023 to October 31, 2023:
|
| October 31, |
|
| July 31, |
|
|
|
| |||
|
| 2023 |
|
| 2023 |
|
| Change |
| |||
Current assets |
| $ | 480,745 |
|
| $ | 418,262 |
|
| $ | 62,483 |
|
Current liabilities |
| $ | 3,979,092 |
|
| $ | 3,964,110 |
|
| $ | 14,982 |
|
Working capital deficiency |
| $ | (3,498,347 | ) |
| $ | (3,545,848 | ) |
| $ | 47,501 |
|
The following table summarizes our cash flow for the three months ended October 31, 2023 and 2022:
|
| Three months ended |
|
|
| |||||||
|
| October 31, |
|
|
| |||||||
|
| 2023 |
|
| 2022 |
|
| Change |
| |||
Cash provided by (used in) operating activities |
| $ | (38,048 | ) |
| $ | 2,269 |
|
| $ | (40,317 | ) |
Cash used in investing activities |
| $ | (94,960 | ) |
| $ | (1,440,077 | ) |
| $ | 1,345,117 |
|
Cash provided by financing activities |
| $ | 201,710 |
|
| $ | 1,441,000 |
|
| $ | (1,239,290 | ) |
Cash on hand |
| $ | 220,420 |
|
| $ | 3,910 |
|
| $ | 216,510 |
|
Operating activities
The cash flow used in operating activities for the three months ended October 31, 2023, reflects our net loss of $78,577. This amount was increased by depreciation of $5,928, prepaid expenses of $5,954, accounts payable and accrued liabilities of $28,382 and accrued interest income of $265.
The cash flow used in operating activities for the three months ended October 31, 2022, reflects our net loss of $22,197. This amount was decreased by prepaid expenses of $1,225, increased by accounts payable and accrued interest of $5,462 and amounts due to related parties of $31,280. It was decreased by deferred interest income of $11,051.
Investing activities
For the three months ended October 31, 2023, the Company used $94,960 for payments of construction.
For the three months ended October 31, 2022, the Company received cash from loan receivable of $124,730 and used $1,389,800 for investment and $175,007 for loan receivable.
Financing activities
For the three months ended October 31, 2023, the Company received advance from loans payable of $215,110 and from related parties of $90,000 and repaid $103,400 to related parties.
For the three months ended October 31, 2022, the Company received advance from related parties of $1,441,000.
| 17 |
| Table of Contents |
Going Concern
Our 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 three months ended October 31, 2023, we incurred net loss of $78,577 and net cash used in operating activities of $38,048. As of October 31, 2023, we had an accumulated deficit of $2,124,315. 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 to continue operations in its new business model 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.
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 October 31, 2023, the end of the period covered by this quarterly report on Form 10-Q. The Disclosure Controls evaluation was done under the supervision and with the participation of management, including our chief executive officer and chief financial officer, which positions are held by the same person who assumed both positions on August 14, 2019, and who is our only executive 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, our sole principal being our chief executive and financial officer and sole director, and our limited internal audit function, our disclosure controls were not effective as of October 31, 2023, 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, 2023, 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. The lack of any separation of duties, with the same person, who is our only principal who serves as both chief executive officer and chief financial officer, who is our sole director, and who does not have an accounting background and serves on a part-time basis, makes it unlikely that we will be able to implement effective internal controls over financial reporting in the near future.
During the period ended October 31, 2023, 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.
| 18 |
| 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 will now be 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 for 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.
On October 2, 2023, the parties participated in a global mediation concerning both lawsuits. The parties have reached a tentative verbal agreement on all material terms to resolve both lawsuits and are in the process of finalizing the agreement.
Item 6. Exhibits.
Exhibits
Exhibit Number |
| Description of Exhibits |
| Section 302 Certificate of Chief Executive Officer and Principal Financial Officer. | |
| Section 906 Certificate of Chief Executive Officer and Principal Financial Officer. | |
101 |
| Inline XBRL DOCUMENT Set for the condensed 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. |
| 19 |
| 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: December 1, 2023 | /s/ Jose Maria Eduardo Gonzalez Romero | ||
| Jose Maria Eduardo Gonzalez Romero | ||
| Chief Executive Officer and Chief Financial Officer | ||
| 20 |
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Jose Maria Eduardo Gonzalez Romero, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of My City Builders, Inc., a Nevada corporation, for the quarter ended October 31, 2023; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
| ||
|
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
| ||
|
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
| ||
|
| d. | Disclosed in this report any change in registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
| ||
|
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: December 1, 2023 | By: | /s/ Jose Maria Eduardo Gonzalez Romero | |
|
| Jose Maria Eduardo Gonzalez Romero | ||
|
| Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Jose Maria Eduardo Gonzalez Romero, President and Chief Executive Officer and Chief Financial Officer of My City Builders, Inc. (the “Registrant”), certifies, under the standards set forth and solely for the purposes of 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of the Registrant for the quarter ended October 31, 2023 (the “Report”):
|
| (1) | fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
| Date: December 1, 2023 | By: | /s/ Jose Maria Eduardo Gonzalez Romero | |
| Name: | Jose Maria Eduardo Gonzalez Romero | ||
| Title: | Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer) |