Nordicus Partners Corp 10-Q for FY2023 Q2
Nordicus Partners Corp (NORD)
About this 10-Q
Nordicus Partners Corp filed this 10-Q on November 14, 2022, covering the quarter ended September 30, 2022 (FY2023 Q2).
Headline figures
Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $47K
- compared with a net loss of $147K a year earlier
U.S. 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
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission
File No.
(Name of small business issuer in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Issuer’s
telephone number
Securities registered under Section 12(b) of the Exchange Act:
| None | None | |
| Title of each class | Name of each exchange on which registered |
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value per share
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, 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 | |
| ☐ |
||
If an emerging growth company, indicate by 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 Act).
As of October 21, 2022, there were shares of the registrant’s Common Stock outstanding.
EKIMAS CORPORATION
TABLE OF CONTENTS
| 2 |
EKIMAS CORPORATION
Balance Sheets
(In thousands, except per share and per share amounts)
September 30, 2022 (Unaudited) | March 31, 2022 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Related party payable | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock; $ par value; shares authorized; shares issued and outstanding as of September 30, 2022 and March 31, 2022 | ||||||||
| Common stock; $ par value; shares authorized; shares and shares issued and shares and shares outstanding as of September 30, 2022 and March 31, 2022, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Treasury stock, shares at cost as of September 30, 2022 and March 31, 2022 | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ( | ) | ||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited financial statements.
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EKIMAS CORPORATION
Statements of Operations
(Unaudited – In thousands, except per share amounts)
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| For the Three Months Ended September 30, | For the Six Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Operating expenses | $ | $ | $ | $ | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income: | ||||||||||||||||
| Transaction fee | ||||||||||||||||
| Other income | ||||||||||||||||
| Loss from operations before provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share – basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Shares used in computing net loss per common share – basic and diluted: | ||||||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
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EKIMAS CORPORATION
Statement of Stockholders’ Equity
For the Three and Six Months Ended September 30, 2022 and 2021
(Unaudited – In thousands)
| Shares | Amount | Capital | Deficit | Stock | Equity | |||||||||||||||||||
| Common Stock | Additional | Total | ||||||||||||||||||||||
| Outstanding | Paid-in | Accumulated | Treasury | Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Stock | Equity | |||||||||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at June 30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at June 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||
| Cash distribution to stockholders | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
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EKIMAS CORPORATION
Statements of Cash Flows
(Unaudited – In thousands)
For the Six Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash flows used in operating activities | ||||||||
| Stock-based compensation | ||||||||
| Changes in assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Related party payable | ( | ) | ||||||
| Net cash flows used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Cash distribution to stockholders | ( | ) | ||||||
| Net cash flows (used in) financing activities | ( | ) | ||||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash at beginning of year | ||||||||
| Cash at end of year | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Income taxes paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited financial statements.
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EKIMAS CORPORATION NOTES TO FINANCIAL STATEMENTS September 30, 2022 (UNAUDITED) |
1. Business Description
On
January 31, 2020 (the “Closing Date”), we completed the sale of substantially all of our assets (the “Asset Sale”)
for a total purchase price of $
As
a result of the Asset Sale, we ceased operating as a developer, manufacturer, marketer and seller of advanced polymers. Subsequent to
the Closing Date, we became engaged in efforts to identify either an (i) operating company to acquire or merge with through an equity-based
exchange transaction or (ii) investor interested in purchasing a majority interest in our common stock, whereby either transaction would
likely result in a change in control. On October 12, 2021, we entered into a Stock Purchase Agreement (the “SPA”) with Reddington
Partners LLC, a California limited liability company (“Reddington”) providing for the purchase of a total of of
our common stock, on a post-split basis, or approximately
Pursuant
to the SPA, the Company effectuated a
Management continues to seek to identify an operating company for the purposes of engaging in a merger or business combination of some kind, or acquire assets or shares of an entity actively engaged in a business that generates sustained revenues. Although we have investigated certain opportunities to determine whether they would have the potential to add value to us for the benefit of our stockholders, we have not yet entered into any binding arrangements.
We do not own or lease any property and maintain a corporate address at 3651 Lindell Road, Las Vegas, Nevada.
2. Liquidity and Going Concern
Our
financial statements have been presented on the basis that we are a going concern, which contemplates the realization of assets and satisfaction
of liabilities in the normal course of business. During the three months ended September 30, 2022 and 2021, we reported a net loss of
approximately $
On
October 12, 2021, we entered into a Stock Purchase Agreement (the “SPA”) with Reddington Partners LLC, a California limited
liability company (“Reddington”) providing for the purchase of a total of of our common stock, on a post-split
basis, or approximately
On
April 11, 2022, effective April 1, 2022, we issued to GK Partners ApS (“GK Partners”), a private investor located in Denmark,
for financial services, a warrant to purchase
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EKIMAS CORPORATION NOTES TO FINANCIAL STATEMENTS September 30, 2022 (UNAUDITED) |
Our
Board of Directors declared a cash distribution to stockholders pursuant to the terms and conditions of the SPA. The cash distribution
of approximately $
Management is seeking to identify an operating company for the purpose of effecting a merger or business combination, or to acquire assets or shares of an entity actively engaged in a business that generates sustained revenues. We do not intend to restrict our consideration to any particular business or industry segment. Because we have limited resources, the scope and number of suitable candidates to merge with is relatively limited. Because we may participate in a business opportunity with a newly formed firm, a firm that is in the development stage, or a firm that is entering a new phase of growth, we may incur further risk due to the inability of the target’s management to have proven its abilities or effectiveness, or the lack of an established market for the target’s products or services, or the inability to reach profitability in the next few years.
Any business combination or transaction will likely result in a significant issuance of shares and substantial dilution to our present stockholders. It is expected that if a transaction is consummated, although no such transaction is assured, then the closing of such a transaction will result in a change in control and such transaction would be expected to be accounted for as a reverse merger, with the operating company being considered the legal acquiree and accounting acquirer, and we would be considered the legal acquirer and the accounting acquiree. As a result, at and subsequent to closing of any such transaction, the financial statements of the operating company would become our financial statements for all periods presented.
Although we have investigated certain opportunities to determine whether they would have the potential to add value to us for the benefit of our stockholders, we have not yet entered into any binding arrangements and there can be no assurance that we will ever identify an opportunity that could result in the consummation of merger or other business combination. As a result of the limited retained funds and uncertainty in consummating a possible merger or business combination, we expect our funds will not be sufficient to meet our needs for more than twelve months from the date of issuance of these financial statements. Accordingly, management believes there is substantial doubt about our ability to continue as a going concern.
3. Interim Financial Statements and Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, these unaudited financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited financial statements include all adjustments (consisting only of normal recurring adjustments), which we consider necessary, for a fair presentation of those financial statements. The results of operations for the three and six months ended September 30, 2022 and cash flows for the six months ended September 30, 2022 may not necessarily be indicative of results that may be expected for any succeeding quarter or for the entire fiscal year. The information contained in this quarterly report on Form 10-Q should be read in conjunction with our audited financial statements included in our annual report on Form 10-K, as of and for the fiscal year ended March 31, 2022 as filed with the Securities and Exchange Commission (the “SEC”).
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments, which are evaluated on an ongoing basis, and that affect the amounts reported in our unaudited financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the amounts of expenses that are not readily apparent from other sources. Actual results could differ from those estimates and judgments.
Our significant accounting policies are described in Note 3 to the audited financial statements as of March 31, 2022 which are included in our Annual Report on Form 10-K as filed with the SEC on June 28, 2022.
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EKIMAS CORPORATION NOTES TO FINANCIAL STATEMENTS September 30, 2022 (UNAUDITED) |
4. Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on our accounting and reporting. We believe that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on our accounting or reporting or that such impact will not be material to our financial position, results of operations and cash flows when implemented.
5. Related Party Transactions
Mr.
Michael Adams, our former chief executive officer, was a non-employee consultant and holder of less than
Since
October 12, 2021, Mr. Yankowitz, our chief executive and financial officer and sole director, was affiliated with legal counsel who provided
us with general legal services (the “Affiliate”). During the three and six months ended September 30, 2022, we recorded legal
fees for services incurred of approximately $
6. Transaction Fee
On
May 20, 2021, we received a $
Basic loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted loss per common share is based upon the weighted-average common shares outstanding during the period plus additional weighted-average common equivalent shares outstanding during the period. Common equivalent shares result from the assumed exercise of outstanding stock options and warrants, the proceeds of which are then assumed to have been used to repurchase outstanding common stock using the treasury stock method. In addition, the numerator is adjusted for any changes in loss that would result from the assumed conversion of potential shares. During the six months ended September 30, 2022, the shares underlying the warrant issued to GK Partners AsP, which are common stock equivalents, would be considered anti-dilutive. There were potentially dilutive shares for the six months ended September 30, 2021.
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EKIMAS CORPORATION NOTES TO FINANCIAL STATEMENTS September 30, 2022 (UNAUDITED) |
8. Income Taxes
We are required to file federal and state income tax returns in the United States. The preparation of these tax returns requires us to interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of tax paid by us. In consultation with our tax advisors, we base our tax returns on interpretations that are believed to be reasonable under the circumstances. The tax returns, however, are subject to routine reviews by the various federal and state taxing authorities in the jurisdictions in which we file tax returns. As part of these reviews, a taxing authority may disagree with respect to the income tax positions taken by us (“uncertain tax positions”) and, therefore, may require us to pay additional taxes. As required under applicable accounting rules, we accrue an amount for our estimate of additional income tax liability, including interest and penalties, which we could incur as a result of the ultimate or effective resolution of the uncertain tax positions. We account for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carry-forwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
We
had
9. Stockholders’ Equity
Preferred Stock
We have authorized shares, $ par value, Preferred Stock (the Preferred Stock”) of which shares have been issued and redeemed, therefore are not considered outstanding. In addition, shares of Preferred Stock have been designated as Series A Junior Participating Preferred Stock (the “Junior Preferred Stock”) with the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions specified in the Certificate of Designation of the Junior Preferred Stock filed with the Delaware Department of State on January 28, 2008. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Junior Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by us that is convertible into Junior Preferred Stock. As of September 30, 2022 and March 31, 2022, there was Junior Preferred Stock issued or outstanding.
Common Stock
On
October 12, 2021, we entered into a Stock Purchase Agreement (the “SPA”) with Reddington Partners LLC, a California limited
liability company (“Reddington”) providing for the purchase of a total of of our common stock, on a post-split
basis, for total cash consideration of $
| 10 |
EKIMAS CORPORATION NOTES TO FINANCIAL STATEMENTS September 30, 2022 (UNAUDITED) |
The
sale of the first tranche of shares of our common stock, on a pre-split basis, was consummated on October 12, 2021 (the “First
Closing”). At the First Closing, the Principal Stockholders entered into the Voting Agreements with Reddington, covering an aggregate
of shares of our common stock, on a pre-split basis. As a result of these transactions, Reddington obtained ownership or voting
power over a total of shares of our common stock, on a pre-split basis, constituting approximately
Pursuant
to the SPA, the Company effectuated a
The
cumulative purchase price for both tranches of shares of our common stock was $
The shares of common stock sold to Reddington were and will be sold in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506(b) of Regulation D under the Securities Act, based in part on the representations of Reddington. There were no sales commissions paid pursuant to this transaction.
Warrant
On
April 11, 2022, effective April 1, 2022, we issued to GK Partners ApS, a private investor located in Denmark, for financial services,
a warrant to immediately purchase up to
In
determining the fair value of the Warrant, we used the Black-Scholes pricing model having the following assumptions: (i) stock option
exercise price of $; (ii) fair market value of our common stock of $ as quoted on the OTC Markets on the date of issuance of
the Warrant; (iii) expected term of option of
The aggregate intrinsic value totaled $, for total outstanding and exercisable warrants and was based on the estimated fair value of our common stock of $ as of June 30, 2022, which is the aggregate fair value of the common stock that would have been received by the warrant holder had the warrant holder exercised the Warrant as of that date, net of the aggregate exercise price.
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EKIMAS CORPORATION NOTES TO FINANCIAL STATEMENTS September 30, 2022 (UNAUDITED) |
Cash Distribution to Stockholders
Our
Board of Directors declared a cash distribution to stockholders pursuant to the terms and conditions of the SPA. The cash distribution
of approximately $
Treasury Stock and Other Transactions
In June 2001, the Board of Directors adopted a share repurchase program authorizing the repurchase of up to of our shares of common stock. In June 2004, the Board of Directors authorized the purchase of an additional shares of common stock. Since June 2001, we have repurchased a total of shares under the share repurchase program, leaving shares remaining to purchase under the share repurchase program. repurchases were made during the three months ended June 30, 2022 and 2021. The share repurchase program authorizes repurchases from time to time in open market transactions, through privately negotiated transactions, block transactions or otherwise, at times and prices deemed appropriate by management, and is not subject to an expiration date.
Stockholder Rights Plan
Our Board of Directors approved the adoption of a stockholder rights plan (the “Rights Plan”) under which all stockholders of record as of February 8, 2008 will receive rights to purchase shares of the Junior Preferred Stock (the “Rights”). The Rights will be distributed as a dividend. Initially, the Rights will attach to, and trade with, our common stock. Subject to the terms, conditions and limitations of the Rights Plan, the Rights will become exercisable if (among other things) a person or group acquires 15% or more of our common stock. Upon such an event, and payment of the purchase price, each Right (except those held by the acquiring person or group) will entitle the holder to acquire shares of our common stock (or the economic equivalent thereof) having a value equal to twice the purchase price. Our Board of Directors may redeem the Rights prior to the time they are triggered. In the event of an unsolicited attempt to acquire us, the Rights Plan is intended to facilitate the full realization of our stockholder value and the fair and equal treatment of all of our stockholders. The Rights Plan does not prevent a takeover attempt.
On August 14, 2017, our board of directors approved and adopted the 2017 Non-Qualified Equity Incentive Plan (the “2017 Plan”), which authorized the grant of non-qualified stock options exercisable into a maximum of shares of our common stock. From August 17, 2017 through December 13, 2018, the board of directors approved the grant of stock options to certain directors, employees and a consultant which were immediately vested and exercisable into a total of shares of our common stock. During December 2019, all stock options granted pursuant to the 2017 Plan were exercised through both cash payment and cashless exercise as provided in the 2017 Plan. There were stock options outstanding pursuant to the 2017 Plan as of September 30, 2022 and March 31, 2022. As of September 30, 2022 and March 31, 2022, there were shares of our common stock, on a post-split basis, available to grant pursuant to the 2017 Plan and no options outstanding or exercisable.
11. Legal Proceedings
We are not the subject of any pending legal proceedings; and to the knowledge of management, no proceedings are presently contemplated against us by any federal, state or local governmental agency. Further, to the knowledge of management, no director or executive officer is party to any action in which any has an interest adverse to us.
12. Subsequent Events
We evaluated all events or transactions that occurred after the balance sheet date through the date when we filed these financial statements and, other than as discussed below, we determined that we did not have any other material recognizable subsequent events.
On
October 14, 2022, we executed a Demand Promissory Note (the “Note”) in favor of GK Partners ApS (the “Lender”),
a private company located in Denmark. The Note has a principal amount of $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward-Looking Statements
This Report on Form 10-Q contains certain statements that are “forward-looking” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Litigation Reform Act”). These forward looking statements and other information are based on our beliefs as well as assumptions made by us using information currently available.
The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward-looking statements. Such statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected, intended or using other similar expressions.
In accordance with the provisions of the Litigation Reform Act, we are making investors aware that such forward-looking statements, because they relate to future events, are by their very nature subject to many important factors that could cause actual results to differ materially from those contemplated by the forward-looking statements contained in this Report on Form 10-Q. For example, given the cessation of our operations as a developer, manufacturer, marketer and seller of advanced polymers on January 31, 2020, resulting from the sale of substantially all of our assets to an independent third party, we became engaged in efforts to identify an operating company to acquire or merge with through an equity-based exchange transaction whereby such a transaction would likely result in a change in control. If we are unable to effect a transaction with an operating company, we may be required to cease all operations, including liquidation through bankruptcy proceedings. For all of these reasons, the reader is cautioned not to place undue reliance on forward-looking statements contained herein, which speak only as of the date hereof. You are encouraged to review our filings with the Securities and Exchange Commission and to read and carefully consider the additional information included in our Annual Report on Form 10K for the fiscal year ended March 31, 2022, including but not limited to the Risk Factors discussed in Part I, Item 1A. We assume no responsibility to update any forward-looking statements as a result of new information, future events, or otherwise except as required by law.
Business
On January 31, 2020 (the “Closing Date”), we completed the sale of substantially all of our assets (the “Asset Sale”) for a total purchase price of $7,250,000 pursuant to an Asset Purchase Agreement entered into between us and Mitsubishi Chemical Performance Polymers, Inc., a Delaware corporation (“MCPP”). Prior to the Closing Date, we developed and manufactured advanced polymer materials which provided critical characteristics in the design and development of medical devices. Our biomaterials were marketed and sold to medical device manufacturers who used our advanced polymers in devices designed for treating a broad range of anatomical sites and disease states.
As a result of the Asset Sale, we ceased operating as a developer, manufacturer, marketer and seller of advanced polymers. Subsequent to the Closing Date, we became engaged in efforts to identify either an (i) operating company to acquire or merge with through an equity-based exchange transaction or (ii) investor interested in purchasing a majority interest in our common stock, whereby either transaction would likely result in a change in control. On October 12, 2021, we entered into a Stock Purchase Agreement (the “SPA”) with Reddington Partners LLC, a California limited liability company (“Reddington”) providing for the purchase of a total of 5,114,475 of our common stock, on a post-split basis, or approximately 90% of our total shares of common stock outstanding for total cash consideration of $400,000. Reddington purchased in two tranches on October 12, 2021 and March 15, 2022.
Pursuant to the SPA, the Company effectuated a 1-for 50 reverse stock split on March 11, 2022 (the “Reverse Split”). Accordingly, on a post-split basis, the shares purchased in connection with the First Closing resulted in Reddington owning 422,725 shares of our common stock. As set forth in the SPA, Reddington then purchased from us on March 15, 2022 an additional 4,691,750 shares of our common stock, on a post-split basis (the “Second Closing”). After the issuance thereof Reddington owned 5,114,475 shares of our common stock, or approximately 90% of our total shares of common stock outstanding.
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Management is seeking to identify an operating company for the purposes of engaging in a merger or business combination of some kind, or acquire assets or shares of an entity actively engaged in a business that generates sustained revenues. Although we have investigated certain opportunities to determine whether they would have the potential to add value to us for the benefit of our stockholders, we have not yet entered into any binding arrangements.
We do not intend to restrict our consideration to any particular business or industry segment. Because we have limited resources, the scope and number of suitable candidates to merge with is relatively limited. Because we may participate in a business opportunity with a newly formed firm, a firm that is in the development stage, or a firm that is entering a new phase of growth, we may incur further risk due to the inability of the target’s management to have proven its abilities or effectiveness, or the lack of an established market for the target’s products or services, or the inability to reach profitability in the next few years.
Any business combination or transaction will likely result in a significant issuance of shares and substantial dilution to our present stockholders. As it is expected that the closing of such a transaction will result in a change in control, such transaction is expected to be accounted for as a reverse merger, with the operating company being considered the legal acquiree and accounting acquirer, and we would be considered the legal acquirer and the accounting acquiree. As a result, at and subsequent to closing of any such transaction, the financial statements of the operating company would become our financial statements for all periods presented.
Critical Accounting Policies
Our critical accounting policies are summarized in Note 3 to our financial statements included in Item 8 of our annual report on Form 10-K for the fiscal year ended March 31, 2022. However, certain of our accounting policies require the application of significant judgment by our management, and such judgments are reflected in the amounts reported in our financial statements. In applying these policies, our management uses its judgment to determine the appropriate assumptions to be used in the determination of estimates. Those estimates are based on our historical experience, terms of existing contracts, our observance of market trends, information provided by our strategic partners and information available from other outside sources, as appropriate. Actual results may differ significantly from the estimates contained in our unaudited financial statements. Other than as set forth below, there have been no changes to our critical accounting policies during the fiscal quarter ended September 30, 2022.
Stock-based Compensation
We applied the provisions of ASC 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all stock-based awards made to employees, including employee stock options, in the condensed consolidated statements of operations.
ASC 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the reward- known as the requisite service period. No compensation cost is recognized for equity instruments for which employees do not render the requisite service. The grant-date fair value of employee share options and similar instruments are estimated using the Black Scholes option-pricing model adjusted for the unique characteristics of those instruments.
Equity instruments issued to non-employees are recorded at their fair values as determined in accordance with ASC 718 as amended by ASU 2018-07. As such, the grant date is the measurement date of an award’s fair value., which is expensed over the requisite service period.
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Results of Operations
Three Months Ended September 30, 2022 vs. September 30, 2021
Operating Expenses
During the three months ended September 30, 2022, our operating expenses were approximately $47,000 as compared with $147,000 for the comparable prior year period, a decrease of approximately $100,000. Our operating expenses are composed of those costs necessary to operate a public company, which are primarily composed of management consultant fees, accounting fees, professional fees, and regulatory fees. The decrease in these operating costs is primarily a result of the decrease in professional and consulting fees incurred prior to the change of control resulting from the purchase of common stock by an investor on October 12, 2021.
Six Months Ended September 30, 2022 vs. September 30, 2021
Operating Expenses
During the six months ended September 30, 2022, our operating expenses were approximately $5,082,000 as compared with $216,000 for the comparable prior year period, an increase of approximately $4,866,000. Our operating expenses are composed of those costs necessary to operate a public company, which are primarily composed of management consultant fees, accounting fees, professional fees, and regulatory fees. The increase in these operating costs is primarily a result of the recording of stock-based compensation of approximately $5,010,000 in connection with the issuance of a warrant immediately exercisable into up to 6,000,000 shares of our common stock at an exercise price of $1.00 per share which is exercisable through December 31, 2023. The increase in these operation costs were offset by a decrease in professional and consulting fees incurred prior to the change of control resulting from the purchase of common stock by an investor on October 12, 2021.
Other Income
On May 20, 2021, we received a $22,000 cash deposit (the “Deposit”) in connection with a non-binding arrangement entered into with a private company having an interest in a potential business combination with us. On August 12, 2021, we were notified by the private company of their intent to terminate the arrangement. The arrangement provided that the Deposit was refundable, net of all reasonable legal, advisory and regulatory fees incurred by us. Our legal, advisory and regulatory fees exceeded the amount of the Deposit, accordingly, there was no refund due to the private company.
Liquidity and Capital Resources
As of September 30, 2022, we had cash of approximately $1,000 as compared to a cash balance of approximately $246,000 as of March 31, 2022.
During the six months ended September 30, 2022, we had net cash of approximately $104,000 used in operating activities. Our cash flows used in operating activities is primarily a result of (i) our net loss of approximately $5,082,000; and (ii) a decrease in accounts payable, accrued expenses and related party payable of approximately $27,000. The cash used in operating activities were offset by stock-based compensation of approximately $5,010,000 in connection with the issuance of a warrant immediately exercisable into up to 6,000,000 shares of our common stock at an exercise price of $1.00 per share through December 31, 2023. During the six months ended September 30, 2021, we had net cash of approximately $125,000 used in operating activities. Our cash flows used in operating activities is primarily a result of our net loss of approximately $194,000 which was offset by an increase in accounts payable and accrued expense of approximately $69,000.
During the six months ended September 30, 2022 we had net cash of approximately $141,000 used in financing activities as a result of the cash distribution of approximately $141,000 on September 22, 2022 to our stockholders of record as of March 15, 2022.There was no cash used in or provided by financing activities or investing activities during the six months ended September 30, 2021.
On January 31, 2020 (the “Closing Date”), we completed the sale of substantially all of our assets (the “Asset Sale”) for a total purchase price of $7,250,000 pursuant to an Asset Purchase Agreement entered into between us and Mitsubishi Chemical Performance Polymers, Inc., a Delaware corporation (“MCPP”). As a result of the Asset Sale, we ceased operating as a developer, manufacturer, marketer and seller of advanced polymers. Subsequent to the Closing Date, we became engaged in efforts to identify either an (i) operating company to acquire or merge with through an equity-based exchange transaction or (ii) investor interested in purchasing a majority interest in our common stock, whereby either transaction would likely result in a change in control. On October 12, 2021, we entered into a Stock Purchase Agreement (the “SPA”) with Reddington Partners LLC, a California limited liability company (“Reddington”) providing for the purchase of a total of 5,114,475 of our common stock, on a post-split basis, or approximately 90% of our total shares of common stock outstanding for total cash consideration of $400,000. Reddington purchased these shares of our common stock in two tranches on October 12, 2021 and March 15, 2022.
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Our financial statements have been presented on the basis that we are a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. During the three months ended September 30, 2022 and 2021, we reported a net loss of approximately $47,000 and $147,000, respectively. During the six months ended September 30, 2022 and 2021, we reported a net loss of approximately $5,082,000 and $194,000, respectively. Cash flows of approximately $104,000 and $125,000 were used in operations for the six months ended September 30, 2022 and 2021, respectively. As a result, we expect our funds will not be sufficient to meet our needs for more than twelve months from the date of issuance of these financial statements. Accordingly, management believes there is substantial doubt about our ability to continue as a going concern.
Management is seeking to identify an operating company for the purposes of engaging in a merger or business combination of some kind, or acquire assets or shares of an entity actively engaged in a business that generates sustained revenues. Although we have investigated certain opportunities to determine whether they would have the potential to add value to us for the benefit of our stockholders, we have not yet entered into any binding arrangements.
We do not intend to restrict our consideration to any particular business or industry segment. Because we have limited resources, the scope and number of suitable candidates to merge with is relatively limited. Because we may participate in a business opportunity with a newly formed firm, a firm that is in the development stage, or a firm that is entering a new phase of growth, we may incur further risk due to the inability of the target’s management to have proven its abilities or effectiveness, or the lack of an established market for the target’s products or services, or the inability to reach profitability in the next few years.
Any business combination or transaction will likely result in a significant issuance of shares and substantial dilution to our present stockholders. As it is expected that the closing of such a transaction will result in a change in control, such transaction is expected to be accounted for as a reverse merger, with the operating company being considered the legal acquiree and accounting acquirer, and we would be considered the legal acquirer and the accounting acquiree. As a result, at and subsequent to closing of any such transaction, the financial statements of the operating company would become our financial statements for all periods presented.
Subsequent Events
On October 14, 2022, we executed a Demand Promissory Note (the “Note”) in favor of GK Partners ApS (the “Lender”), a private company located in Denmark. The Note has a principal amount of $40,000, bears interest at a rate of 3% per annum and matures on June 30, 2023 (the “Maturity Date”). Principal and accrued interest are payable on the Maturity Date or earlier on demand. The Lender advanced $20,000 of the principal amount of the Note on October 14, 2022 and is expected to advance the remaining $20,000 no later than October 21, 2022. We plan to use the amounts advanced to pay certain operating expenses.
Commitments
We do not have any long-term commitments as of September 30, 2022.
Off-Balance Sheet Arrangements
As of September 30, 2022, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
The certificates of our principal executive officer and principal financial and accounting officer attached as Exhibits 31.1 and 31.2 to this Quarterly Report on Form 10-Q include, in paragraph 4 of such certifications, information concerning our disclosure controls and procedures, and internal control over financial reporting. Such certifications should be read in conjunction with the information contained in this Item 4 for a more complete understanding of the matters covered by such certifications.
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Disclosure Controls and Procedures
Our chief executive and financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions to be made regarding required disclosure. It should be noted that any system of controls and procedures, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met and that management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our chief executive and financial officer concluded that our disclosure controls and procedures as of September 30, 2022 were not effective at the reasonable assurance level due to limited resources in the finance and accounting functions. We intend to take appropriate and reasonable steps to make improvements to remediate these deficiencies.
Changes in Internal Control Over Financial Reporting
There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) during the fiscal period to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are not the subject of any pending legal proceedings; and to the knowledge of management, no proceedings are presently contemplated against us by any federal, state or local governmental agency. Further, to the knowledge of management, no director or executive officer is party to any action in which any has an interest adverse to us.
Item 1A. Risk Factors
Not applicable.
Item 2. Unregistered Sales of Equity Securities
None
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
| Exhibit No. | Description | |
| 31.1 | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 | Certification of the Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1 | Certification of the Chief Executive Officer Pursuant to 18 U.S.C. 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxomony Extension Calculation Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| 18 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| EKIMAS CORPORATION | ||
| By: | /s/ Bennett J. Yankowitz | |
| Bennett J. Yankowitz | ||
| Chief Executive and Financial Officer | ||
| (Principal Executive, Financial and Accounting Officer) | ||
| Dated: November 14, 2022 | ||
| 19 |
Exhibit 31.1
CERTIFICATION
I, Bennett J. Yankowitz, hereby certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of EKIMAS Corporation (the “Company”);
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 Company as of, and for, the periods presented in this report;
4. I am 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 Company 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 Company 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 Company’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 the Company’s internal control over financial reporting that occurred during the Company’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Company’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 Company’s internal control over financial reporting.
| Date: November 14, 2022 | |
| /s/ Bennett J. Yankowitz | |
| Bennett J. Yankowitz | |
| Chief Executive and Financial Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
I, Bennett J. Yankowitz, hereby certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of EKIMAS Corporation (the “Company”);
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 Company as of, and for, the periods presented in this report;
4. I am 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 Company 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 Company 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 Company’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 the Company’s internal control over financial reporting that occurred during the Company’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Company’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 Company’s internal control over financial reporting.
| Date: November 14, 2022 | |
| /s/ Bennett J. Yankowitz | |
| Bennett J. Yankowitz | |
| Chief Executive and Financial Officer | |
| (Principal Financial and Accounting 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
In connection with the Quarterly Report of EKIMAS Corporation, a Delaware corporation (the “Company”), on Form 10-Q for the fiscal quarter ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Bennett J. Yankowitz, Chief Executive and Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
| (1) | The Report 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 Company. |
| Date: November 14, 2022 | |
| /s/ Bennett J. Yankowitz | |
| Bennett J. Yankowitz | |
| Chief Executive and Financial Officer | |
| (Principal Financial and Accounting Officer) |
This certification accompanies each report of the Company on Form 10-Q and Form 10-K pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by §906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.