General
This Management's Discussion and Analysis of Financial Condition and Results of
Operations discusses the operating results and financial condition of the
Company for the fiscal years ended September 30, 2016 and 2015. The discussion
and analysis set forth below is intended to assist you in understanding the
financial condition and results of our operations and should be read in
conjunction with our audited financial statements and the accompanying notes
included elsewhere in this Form 10-K. The following discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated in the forward-looking
statements as a result of various factors, including those discussed elsewhere
in this Form 10-K.
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Overview
Operations. The Company has not conducted any substantial operations since May
24, 2010, the date on which AMI foreclosed on and took possession of all of the
Company's then-existing operating entities other than those sold by the Company
to an entity affiliated with Mr. King.
During the fiscal years ended September 30, 2013 and 2014, the Company's primary
activities consisted of taking the steps necessary to reactivate its reporting
obligations under Section 15(d) of the Exchange Act that had been suspended
since 2011 ("Reporting Reactivation"). In the first quarter of the fiscal year
ended September 30, 2015, on December 17, 2014, the Company re-activated is
filing obligations under the Exchange Act.
Following the re-activation of our filing obligations, we attempted to seek to
maximize shareholder value by searching for and identifying suitable potential
target private companies or business partners for a business combination that
met the Company's strategic objectives. However, the Company re-evaluated its
plans for the 2015 Fiscal Year and concluded that an improved balance sheet with
less liabilities would be an important factor for attracting a business partner
and would be more likely to result in the Company achieving its strategic
objectives. As a result, management determined to postpone its acquisition and
business combination efforts during the 2015 Fiscal Year.
By the end of the 2015 Fiscal Year, the Company concluded that its balance sheet
had improved significantly and, as a result, management decided to commence
actively pursuing such transactions during the 2016 Fiscal Year. We pursued our
search for a business opportunity during 2016 Fiscal Year primarily through our
officers and directors. Although the Company had held preliminary discussions
regarding potential business combinations transactions, the Company ultimately
was unable to successfully identify a suitable candidate or negotiate the terms
of any such business combination during the 2016 Fiscal Year.
As of the fiscal year ended September 30, 2016, the Company had expended
substantially all of its available cash and had not been able to secure any
additional funds to finance its continued operations. As a result, the Company
was unable to prepare and timely file its periodic reports under the Exchange
Act, commencing with its Annual Report on Form 10-K for the fiscal year ended
September 30, 2016 and, other than maintaining its corporate status,was dormant
from such date through May 2020.
Financial Condition. We did not record revenues from operations during the
fiscal years covered by our financial statements included in this Form 10-K and
are not currently engaged in any business activities that provide cash flows. We
do not expect to generate any revenues over the next 12 months unless we are
able to secure additional financing to continue operations. Our ability to
continue as a going concern is dependent upon our ability to develop additional
sources of capital, locate and complete a merger with another company, and
ultimately, achieve profitable operations.
Our principal business objective during the 2016 Fiscal Year was to achieve
potential long-term growth through a combination with a business. However, our
failure to successfully identify a potential business combination as of the end
of the 2016 Fiscal Year or to raise funds to continue our operations or for the
consummation of an acquisition have had a severe negative impact on our ability
to become a viable company.
We have negative working capital, negative shareholders' equity, and have not
earned any revenues from operations since the fiscal year ended September 30,
2011. Because we have had no revenues from operations and do not own any
significant assets against which we can borrow funds, we historically had relied
on funds furnished by Mr. Toomey, a principal shareholder, director, and
secretary of the Company, in exchange for issuances of our convertible debt
securities in order to finance our Reactivation Activities and to finance our
operations following our Reporting Reactivation. He was our sole source of
financing during the fiscal years ended September 30, 2015 and 2016. Most of the
principal amounts of the convertible notes issued to Mr. Toomey have been
converted into common shares of the Company and are no longer outstanding
indebtedness obligations of the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources" for a description of the outstanding convertible promissory
notes held by Mr. Toomey. However, Mr. Toomey previously advised the Company
that he did not intend to provide the Company with any further loans or equity
financing after September 30, 2016 if the Company was unable to enter into a
letter of intent or receive a formal offer to engage in a bona fide business
combination with a target company or business operation on or before such date.
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However, due to our inability to satisfy the conditions for further financing
established by Mr. Toomey, Mr. Toomey did not provide the Company with any
further loans or equity financing to the Company after July 11, 2016 through the
end of the 2016 Fiscal Year, and he indicated that he had no current plans to
provide any further financings unless he later determined that market conditions
or the Company's prospects have substantially improved.
As a result, the Company had very limited remaining cash resources during period
following July 11, 2016 through the end of the 2016 Fiscal Year and, other than
maintaining its corporate status, the Company's operations were dormant during
such period. Unless and until we are able to obtain additional financing, our
operations will remain dormant and our ability to continue as a going concern is
doubtful. There can be no assurance that we will be able to obtain any
additional financing in the future, and if we are unable to receive sufficient
additional financing to finance our operations upon acceptable terms, it is
likely that our business would cease operations. See, however, "Subsequent
Developments" below for an update on our ability to receive additional
financings from Mr. Toomey commencing in 2020.
Except as described in "Subsequent Developments" below, we have no specific
plans, understandings or agreements with respect to the raising of any
additional financings, and we may seek to raise the required capital by the
issuance of equity or debt securities or by other means. Since we have no such
arrangements or plans currently in effect (other than as described in
"Subsequent Developments" below), our limited ability to raise funds to continue
operations and to seek an acquisition may have a severely negative impact on our
ability to become a viable company. Our historical operating results disclosed
in this Form 10-K are not meaningful to our future results.
Results of Operations
Comparison of Years Ended September 30, 2016 and 2015
Revenues. Because we currently do not have any business operations, we have not
had any revenues during our fiscal years ended September 30, 2016 and September
30, 2015.
General and Administrative Expenses. We had operating expenses of $135,412 and
$147,030 for the years ended September 30, 2016 and 2015, respectively. These
expenses consisted of general and administrative expenses which were primarily
comprised of professional fees associated with various corporate and accounting
matters, the cost of directors' and officers' insurance, and the costs
associated with the Reactivation Actions. The decrease in such expenses for the
year ended September 30, 2016 was due to the reduced level of Reactivation
Actions which were primarily undertaken in 2014 and the first quarter of 2015 to
reactivate the Company's suspended reporting obligations under Section 15(d) of
the Exchange Act. Our general and administrative expenses decreased following
the completion of our Reactivation Actions in December 2014 and are expected to
remain relatively low until such time as we effect a merger or other business
combination with an operating business, if at all.
Net Income (Loss). We recognized a net loss of $135,412 for the fiscal year
ended September 30, 2016 as compared to net income of $2,023,143 for the fiscal
year ended September 30, 2015. We had no revenues during fiscal year ended
September 30, 2016 and our net losses were due to the general and administrative
expenses incurred during the fiscal year. Our net income for 2015 was due
primarily to the settlement or extinguishment of debt by the Company during the
year, offset in part by an increase in general and administrative expenses
attributable to the costs and expenses associated with the Reactivation
Activities.
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Liquidity and Capital Resources
As of September 30, 2016, the Company had limited cash resources and we had a
working capital deficit of $189,016. Current liabilities decreased to $210,324
at September 30, 2016 from $311,667 at September 30, 2015 primarily due to the
conversion of notes payable to a related party. Total assets increased to
$21,308 as of September 30, 2016 from $9,373 at September 30, 2015 due to the
increased amount of working capital advanced by Mr. Toomey during 2016.
We had no material commitments for capital expenditures as of September 30,
2016.
During fiscal years ended September 30, 2016 and 2015, we have been reliant on
monies loaned to us by Mr. Toomey to finance our operations and to pay the costs
associated with the Reactivation Actions and the general corporate activities of
the Company.
During the fiscal year ended September 30, 2016, the Company borrowed $90,000
from Mr. Toomey to pay for the Company's ongoing business operations.
· On December 7, 2015, Mr. Toomey advanced $20,000 to the Company;
· On March 3, 2016, Mr. Toomey advanced $20,000 to the Company;
· On July 11, 2016, Mr. Toomey advanced $30,000 to the Company; and
· On September 19, 2016, Mr. Toomey advanced $20,000 to the Company.
These funds were used to pay for the Company's ongoing business operations,
consisting primarily of professional fees. The funds advanced on December 7,
2015, were acknowledged and formalized by the parties pursuant to a Convertible
Promissory Note Purchase Agreement, effective as of December 15, 2015 (the
"December 2015 Note Agreement"), by and between the Company and Mr. Toomey, and
issuing the December 2015 Promissory Note to Mr. Toomey. The December 2015
Promissory Note is convertible into our common shares by Mr. Toomey at a fixed
conversion price equal to $1.00 per share (subject to anti-dilution
adjustments).
The funds advanced to the Company on March 3, 2016 were acknowledged and
formalized by the parties pursuant to a Convertible Promissory Note Purchase
Agreement, effective as of May 18, 2016 (the "May 2016 Note Agreement"), by and
between the Company and Mr. Toomey, and the issuance of the May 2016 Promissory
Note to Mr. Toomey. The May 2016 Promissory Note is convertible into our common
shares by Mr. Toomey at a fixed conversion price equal to $1.00 per share
(subject to anti-dilution adjustments).
The funds advanced to the Company on July 11, 2016 were acknowledged and
formalized by the parties pursuant to a Convertible Promissory Note Purchase
Agreement, effective as of August 10, 2016 (the "August 2016 Note Agreement"),
by and between the Company and Mr. Toomey, and the issuance of the August 2016
Promissory Note to Mr. Toomey. The August 2016 Promissory Note is convertible
into our common shares by Mr. Toomey at a fixed conversion price equal to $1.00
per share (subject to anti-dilution adjustments).
The funds advanced to the Company on September 19, 2016 were acknowledged and
formalized by the parties pursuant to a Convertible Promissory Note Purchase
Agreement effective as of September 19, 2016 (the "September 2016 Note
Agreement"), by and between the Company and Mr. Toomey, and the issuance of the
September 2016 Promissory Note to Mr. Toomey. The September 2016 Promissory Note
is convertible into our common shares by Mr. Toomey at a fixed conversion price
equal to $1.00 per share (subject to anti-dilution adjustments).
Mr. Toomey has historically converted past promissory notes. However, as of the
end of the 2016 Fiscal Year he had not executed his conversion rights under the
December 2015 Promissory Note, the May 2016 Promissory Note, the July 2016
Promissory Note, or the September 2016 Promissory Note, and had indicated that
he is unlikely to exercise such rights, although he reserved the right to do so
in the future.
Because we do not have any revenues from operations, absent a merger or other
business combination with an operating company or a public or private sale of
our equity or debt securities, the occurrence of either of which cannot be
assured, we were dependent upon future loans or equity investments from our
present shareholders or management to fund operating shortfalls and do not
foresee a change in this situation in the immediate future. However, we were
unable to raise capital or secure loans to finance for our operational needs
during after July 11, 2016 through the end of the 2016 Fiscal Year. As a result,
other than maintaining our corporate status, the Company's operations were
dormant from July 18, 2016 to the end of the 2016 Fiscal Year. Unless and until
we can obtain additional financing, our operations will continue to be dormant.
Although we may seek external sources of financing, we have no specific plans,
understandings, or agreements with respect to any potential debt or equity
financings, and there can be no assurances that any additional financings will
be available to us on satisfactory terms and conditions, if at all. Unless we
can obtain additional financing, our ability to continue as a going concern is
doubtful.
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Subsequent Developments
As of the end of the 2016 Fiscal Year, the Company had been unsuccessful in its
efforts to identify and engage in a business combination with a potential target
company or business, had used all of its available cash, and was unable to
secure any additional source of funds to finance its continued operations. As a
result, the Company was unable to timely file its periodic reports under the
Exchange Act, commencing with its Annual Report on Form 10-K for the fiscal year
ended September 30, 2016 and, other than maintaining its corporate status, has
been dormant from such date through May 2020.
In May 2020, the Company determined that the business environment had
sufficiently changed so that identifying target and completing a business
combination may be more likely than was previously the case. Accordingly, the
Company determined to attempt to seek the financing necessary to prepare and
file all of its delinquent periodic reports under the Exchange Act and to again
aggressively pursue an acquisition target. See "Item 1 - Recent Activities"
above for a discussion of the Company's current efforts taken to date.
In order for the Company to finance the preparation and filing of all of the
Company's Forms 10-K for filing with the Commission, Mr. Toomey made the
following loans to the Company in aggregate amount of approximately $130,000
during the 2020 calendar year (referred to as the Toomey Loans):
· On May 5, 2020, a loan of $5,000 in principal amount;
· On October 19, 2020, a loan of $25,000 in principal amount; and
· On December 21, 2020, a loan of $100,000 in principal amount.
The Toomey Loans are evidenced by a consolidated promissory note, dated February
1, 2021, issued by the Company to Mr. Toomey (the "2021 Promissory Note"). The
2021 Promissory Note bears interest, commencing on the date of the loan, at an
initial rate of 2% per annum and the note matures on December 31, 2023. The
maturity date of the 2021 Promissory Notes will accelerate and be due and
payable immediately upon any change of control, merger, or other business
combination (as defined in the 2021 Promissory Note). If the maturity date is
extended for any reason whatsoever (including in connection with an acceleration
event), the 2021 Promissory Note will bear interest at a rate of 5% per annum,
commencing on the date of any such extension. The 2021 Promissory Note is not
convertible into our common shares.
Delinquent Filings
The Company is filing this Annual Report on Form 10-K and all other delinquent
reports on Form 10-K that it was required to file with the Commission since June
30, 2016, together with delinquent reports on Forms 10-Q for the fiscal year
ended September 30, 2021. Although the filing of our delinquent reports under
the Exchange Act will bring us current in our reporting obligations, it is the
Commission's position that such filings will not "cure" Section 15(d)
violations, and will not make us timely for purposes of eligibility to use
certain Securities Act forms.
Off-Balance Sheet Arrangements
We do not have any off balance sheet arrangements.
Critical Accounting Policies and Estimates
We prepare our financial statements in conformity with accounting principles
generally accepted in the United States of America ("GAAP"), which requires
management to make certain estimates and assumptions and apply judgments.
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In its report dated December 7, 2021, our auditors, Accell Audit & Compliance
P.A., expressed an opinion that there is substantial doubt about our ability to
continue as a going concern. Our financial statements do not include any
adjustments that may result from the outcome of this uncertainty. We generated
no operating revenues for the fiscal years ended September 30, 2016 and 2015,
and at September 30, 2016 we had an accumulated stockholders' deficit of
approximately $209,016. Furthermore, at September 30, 2016 and 2015, we had a
retained deficit of approximately $4,579,323, and $4,443,911, respectively, and
a working capital deficit of approximately $189,076 at September 30, 2016. As a
result of our working capital deficiency and anticipated operating costs for the
next twelve months, we do not have sufficient funds available to sustain our
operations for a reasonable period without additional financing. Our
continuation as a going concern is therefore dependent upon future events,
including our ability to raise additional capital and to generate positive cash
flows.
We base our estimates and judgments on historical experience, current trends,
and other factors that management believes to be important at the time the
financial statements are prepared; actual results could differ from our
estimates and such differences could be material. We have identified below the
critical accounting policies, which are assumptions made by management about
matters that are highly uncertain and that are of critical importance in the
presentation of our financial position, results of operations and cash flows.
Due to the need to make estimates about the effect of matters that are
inherently uncertain, materially different amounts could be reported under
different conditions or using different assumptions. On a regular basis, we
review our critical accounting policies and how they are applied in the
preparation our financial statements.
Use of Estimates. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets, if any, at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
Income Taxes. Deferred taxes are provided on the asset and liability method
whereby deferred tax assets are recognized for deductible temporary differences
and operating loss and tax credit carry forwards and deferred tax liabilities
are recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Future tax benefits for net operating loss carry forwards are recognized
to the extent that realization of these benefits is considered more likely than
not. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized.
The Company follows the provisions of FASB ASC 740-10 "Uncertainty in Income
Taxes" (ASC 740-10). A reconciliation of the beginning and ending amount of
unrecognized tax benefits has not been provided since there are not unrecognized
benefits for all periods presented. The Company has not recognized interest
expense or penalties as a result of the implementation of ASC 740-10. If there
were an unrecognized tax benefit, the Company would recognize interest accrued
related to unrecognized tax benefit in interest expense and penalties in
operating expenses.
Net Income (Loss) Per Share. Basic income (loss) per share is computed by
dividing net income (loss) available to common shareholders by the weighted
average number of outstanding common shares during the period of computation.
Diluted loss per share gives effect to potentially dilutive common shares
outstanding. The Company gives effect to these dilutive securities using the
Treasury Stock Method. Potentially dilutive securities also include other
convertible financial instruments. The Company gives effect to these dilutive
securities using the If-Converted-Method.
New Accounting Pronouncements
For a description of recent accounting standards, including the expected dates
of adoption and estimated effects, if any, on our financial statements, see
"Note 8: Recent Accounting Pronouncement" in Part II, Item 8 of this Form 10-K.
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KINGFISH HOLDING CORPORATION 
