SMSA CRANE ACQUISITION CORP. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.
(Edgar Glimpses Via Acquire Media NewsEdge) The following Management's Discussion and Analysis of Financial Condition and
Results of Operations, or MD&A, is intended to help the reader understand SMSA
Crane Acquisition Corp, our operations and our present business environment.
MD&A is provided as a supplement to, and should be read in conjunction with, our
financial statements and the accompanying notes thereto contained in "Item 1.
Financial Statements and Supplementary Data" of this report. This overview
summarizes the MD&A, which includes the following sections:
• Overview of Our Business - a general overview of our future
• Critical Accounting Policies and Estimates - a discussion of
accounting policies that require critical judgments and
• Operations Review - an analysis of our Company's results of
operations for the two periods presented in our financial
statements and from August 1, 2017 (date of bankruptcy
settlement) to March 31, 2014. Except to the extent that
differences among our operating segments are material to an
understanding of our business as a whole, we present the
discussion in the MD&A and;
• Liquidity, Capital Resources and Financial Position - an
analysis of our cash flows; an overview of our financial
As discussed in more detail at the beginning of this Quarterly Report, the
following discussion contains forward-looking statements that involve risks,
uncertainties, and assumptions such as statements of our plans, objectives,
expectations, and intentions. Our actual results may differ materially from
those discussed in these forward-looking statements because of the risks and
uncertainties inherent in future events.
Overview of Our Future Business
The Company's business plan is to consummate the reverse merger transaction with
Coquí Radio Pharmaceuticals, Corp. ("Coquí") who intends to establish a
dedicated Medical Isotope Production Facility in the United States to provide a
reliable domestic source of certain radioisotopes for use in nuclear medicine.
In 2013, Coquí acquired control of the Company by purchasing 9,900,000 shares of
common stock in a private transaction. In connection with the proposed reverse
merger, Coquí will cancel these shares and its shareholders will receive
10,792,801 shares of common stock as merger consideration.
On February 14, 2014, the Company closed on the sale of 927,000 shares of its
common stock, the minimum amount offered in its private placement offering to
accredited investors in exchange for gross proceeds of $3,068,370. The net
proceeds to the Company from the offering were $2,941,939, $2,891,673 of which
was transferred to Coquí on April 14, 2014 and $50,266 of which was transferred
to Coquí on April 28, 2014. An additional 368,000 shares of common stock were
sold on April 28, 2014 in the Company's private placement to accredited
investors in exchange for gross proceeds of approximately $1.2 million at $3.31
The Company's ultimate continued existence is dependent upon its ability to
generate sufficient cash flows from operations to support its daily operations
as well as provide sufficient resources to retire existing liabilities and
obligations on a timely basis. The Company faces considerable risk in its
business plan and a potential shortfall of funding due the potential inability
to raise capital in the equity securities market. If adequate operating capital
and/or cash flows are not received during the next twelve months, the Company
could become dormant until such time as necessary funds could be raised.
The Company anticipates future sales or issuances of equity securities to
fulfill its business plan. However, there is no assurance that the Company will
be able to obtain additional funding through the sales of additional equity
securities or, that such funding, if available, will be obtained on terms
favorable to or affordable by the Company.
There is no assurance that the implementation of our business plan or any future
business combination transaction will result in the appreciation of our
stockholders' investment in the then outstanding common stock.
Critical Accounting Policies and Estimates
The SEC issued Financial Reporting Release No. 60, "Cautionary Advice Regarding
Disclosure About Critical Accounting Policies" suggesting that companies provide
additional disclosure and commentary on their most critical accounting policies.
In Financial Reporting Release No. 60, the SEC has defined the most critical
accounting policies as the ones that are most important to the portrayal of a
company's financial condition and operating results, and require management to
make its most difficult and subjective judgments, often as a result of the need
to make estimates of matters that are inherently uncertain. Based on this
definition, we have identified the following significant policies as critical to
the understanding of our financial statements.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make a variety of estimates and
assumptions that affect (i) the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the financial
statements and (ii) the reported amounts of revenues and expenses during the
reporting periods covered by the financial statements.
Our management expects to make judgments and estimates about the effect of
matters that are inherently uncertain. As the number of variables and
assumptions affecting the future resolution of the uncertainties increase, these
judgments become even more subjective and complex. Although we believe that our
estimates and assumptions are reasonable, actual results may differ
significantly from these estimates. Changes in estimates and assumptions based
upon actual results may have a material impact on our results of operation
and/or financial condition.
Our significant accounting policies are summarized in Note E of our financial
statements. While all these significant accounting policies impact our financial
condition and results of operations, we view certain of these policies as
critical. Policies determined to be critical are those policies that have the
most significant impact on our financial statements and require management to
use a greater degree of judgment and estimates. Actual results may differ from
those estimates. Our management believes that given current facts and
circumstances, it is unlikely that applying any other reasonable judgments or
estimate methodologies would cause effect on our results of operations,
financial position or liquidity for the periods presented in this report.
Management assesses the probability of loss for certain contingencies and
accrues a liability and/or discloses the relevant circumstances, as appropriate.
Management discloses any liability which, taken as a whole, may have a material
adverse effect on the financial condition of the Company.
Results of Operations
The Company had no revenue for the three month period ended March 31, 2014 or
2013 or for the period from August 1, 2007 (date of bankruptcy settlement)
through March 31, 2014, respectively. It is anticipated that the Company will
not generate revenue until Coquí executes its business plan.
The following table presents our total operating expenses for the three months
Three Months Ended
Operating expenses $ 44,872 $ 4,035
Operating expenses consist mostly of professional services. Professional
services are comprised of outside legal, audit, accounting, transfer agent and
Edgar filer services and other services. These expenses were directly related to
the maintenance of the corporate entity and the preparation and filing of
reports with the Securities and Exchange Commission. The increase in operating
expenses in 2014 was primarily due to the increase in legal fees to prepare the
Company's private placement documents and legal work on other corporate matters.
Total cumulative Operating Expenses for the period from August 1, 2007 (date of
bankruptcy settlement) through March 31, 2014 was $140,204. These operating
expenses consisted of professional fees of $93,435 and other general and
administrative expenses of $43,853 and reorganization costs of $2,916.
See Note D of the Note J to our Financial Statements included in this Quarterly
Report on Form 10-Q for information regarding our private placement.
It is anticipated that future operating expenses will increase as the Company
complies with its periodic reporting requirements and effects its reverse
acquisition and business plan with Coquí.
Liquidity and Capital Resources
The following table provides detailed information about our net cash flow for
all financial statements periods presented in this Report.
Three Months Ended
Net cash used in operating activities $ (26,874 ) $ -
Net cash provided by investing activities
Net cash provided by financing activities 2,968,723 -
Net cash inflow $ 2,941,939 $ -
Cash used in operating activities for the three months ended March 31, 2014,
consisted of net loss as well as the effect of changes in working capital. Cash
used in operating activities for the three months ended March 31, 2014,
consisted of an approximate net loss of $45,000. Total cash provided by working
capital totaled approximately $18,000. The cash provided by working capital was
due to an increase in accounts payable and accrued expenses. Total cumulative
cash used in operating activities for the period from August 1, 2007 (date of
bankruptcy settlement) through March 31, 2014 was approximately $99,000.
Net cash provided by our investing activities for the three months ended March
31, 2014 and 2013 was $0. Total cumulative cash used in investing activities for
the period from August 1, 2007 (date of bankruptcy settlement) through March 31,
2014 was $0.
Net cash provided by our financing activities for the three months ended March
31, 2014, as compared to 2013 increased by approximately $2,969,000. This
increase was due to the first closing of our private placement sale of our
common stock taking place in February 2014.
Total cumulative cash provided by financing activities for the period from
August 1, 2007 (date of bankruptcy settlement) through March 31, 2014 was
See Note D and Note J of the Notes to our Financial Statements included in this
Quarterly Report on Form 10-Q for information regarding our private placement
sales of our common stock.
Pending our completion of the reverse merger, we are not conducting any business
activities. Our only operating activities are to comply with Securities and
Exchange Commission reporting requirements and complete the reverse merger. We
have no liquidity having loaned all of our cash to Coquí. If we raise any
additional funds prior to completion of the reverse merger, they will be used
for the benefit of Coquí.
The net proceeds of the Company's private placement offering from its financing
activities have been used, primarily through advances to Coquí, it to use in
retaining consultants for preparing an environmental report on the site where
the Facility is to be located, Nuclear Regulatory Commission ("NRC") counsel,
hiring contractors to begin preliminary work on the Facility prior to receiving
any NRC licensing, and for general working capital purposes.
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