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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 business, • Critical Accounting Policies and Estimates - a discussion of accounting policies that require critical judgments and estimates; • 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 position. 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 per share. 14 -------------------------------------------------------------------------------- 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. 15 -------------------------------------------------------------------------------- Contingencies 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. Operations Review Results of Operations Revenue 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. Operating Expenses The following table presents our total operating expenses for the three months presented: Three Months Ended March 31, 2014 2013 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. 16 -------------------------------------------------------------------------------- Cash Flow Three Months Ended March 31, 2014 2013 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 $ - Operating Activities 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. Investing Activities 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. Financing Activities 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 approximately $3,041,000. 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. 17 -------------------------------------------------------------------------------- |