TRAIL ONE, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.
(Edgar Glimpses Via Acquire Media NewsEdge) OVERVIEW AND OUTLOOK
Trail One was formed in the state of Nevada on September 9, 2010 to establish
retail sales of automobile license plate tags to the general public. The Company
expects to generate its corporate revenue from the sale of its license plate
These statements reflect all adjustments, consisting of normal recurring
adjustments, which in the opinion of management are necessary for fair
presentation of the information contained therein. The Company follows the same
accounting policies in the preparation of interim reports.
The Company has adopted a fiscal year end of September 30.
Trail One, Inc. is presently marketing an automobile license plate tag as an
The Company may market Trail One through a combination of direct sales,
referrals and networking within the industry. To date the Company has not
generated any sales and has a limited operating history.
To date, the Company, has not generated any sales revenues, has incurred
expenses and has sustained losses. Consequently, its operations are subject to
all the risks inherent in the establishment of a new business enterprise. In
addition, the Company will require additional financing to fund future
operations. The Company requires additional capital to complete the development
and commercialization of its license plate tags. Management is currently seeking
additional sources of equity or debt financing; however the Company does not
have any commitments or definitive or binding arrangements for such funds. There
can be no assurance that such funds, if available at all, can be obtained on
terms reasonable to the Company. If the Company is unsuccessful in raising
additional capital it will need to reduce costs and operations substantially.
Based on our current operating plan, we do not expect to generate revenue that
is sufficient to cover our expenses for the next three months, and we will need
to obtain additional financing to operate our business for the next three
months. Our "burn rate" is approximately $2,099 per month. Most of our expenses
are anticipated to be legal, accounting, transfer agent, and other costs
associated with being a public company. Additional financing, whether through
equity security sales, debt instruments, and private financing to fund
operations, may not be available, or if available, may be on terms unacceptable
to us. Our ability to maintain sufficient liquidity is dependent on our ability
to raise additional capital.
The Company is currently considering expanding its business by acquiring the
business or equity of another entity without the Company paying any material
amount of cash consideration (a "Reverse Merger Transaction"). Any Reverse
Merger Transaction may be structured as an acquisition of assets or equity by
the Company issuing stock, exchanging stock and other equity interests, merging
with another entity or entities or entering into any transaction with similar
effect. In connection with any Reverse Merger Transaction, the Company will
likely assume the obligations of the acquired business, which may include debt
or other financing, and may incur other debt or other financing. The amount of
stock that the Company may issue in any Reverse Merger Transaction will likely
result in a change in control of the Company. The Company is currently
negotiating, on a non-binding basis, the terms and conditions of a Reverse
Merger Transaction with a business entity. If the Reverse Merger Transaction is
consummated, the Company would continue as a smaller reporting company. No
assurance may be given, however, that such negotiations will conclude with terms
and conditions that would be acceptable to us or that any such Reverse Merger
Transaction would be consummated.
If we issue additional equity securities to raise funds, the ownership
percentage of our existing security holder would be reduced. New investors may
demand rights, preferences or privileges senior to those of existing holders of
our common stock. Debt incurred by us would be senior to equity in the ability
of debt holders to make claims on our assets. The terms of any debt issued could
impose restrictions on our operations. If adequate funds are not available to
satisfy either short or long-term capital requirements, our operations and
liquidity could be materially adversely affected and we could be forced to cease
Change of Control
On May 24, 2013 (the "Closing Date"), the Company's largest shareholder Mr.
Ralph Montrone entered into a Security Purchase Agreement (the "SPA") with Mr.
Mohammad Omar Rahman. Pursuant to the SPA, Mr. Montrone sold his 10,000,000
issued and outstanding shares of common stock, representing approximately 55.6%
of the issued and outstanding shares of the Company, to Mr. Rahman. As of the
Closing Date, Mr. Rahman was appointed the new CEO and elected by shareholders
to serve as a Director of the Company.
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Results of Operations for the Three Months Ended June 30, 2014 and 2013
The Company had no revenues during the three months ending June 30, 2014 and
June 30, 2013.
Total operating expenses were $5,975 for the three months ended June 30, 2014
compared to $3,436 for the three months ended June 30, 2013, an increase of
$2,539. The increase in operating expense for the three months ended June 30,
2014 compared to June 30, 2013 was due primarily to increases in our general and
Total interest expense was $322 for the three months ended June 30, 2014
compared to $996 for the three months ended June 30, 2013, a decrease of $674.
For the reasons above, our net loss for the three months ended June 30, 2014 was
$6,297 compared to $4,432 for the three months ended June 30, 2013, an increase
of $1,865 or approximately 42%.
Results of Operations for the Nine Months Ended June 30, 2014 and 2013
The Company had no revenues during the nine months ending June 30, 2014 and June
Total operating expenses were $16,004 for the nine months ended June 30, 2014
compared to $13,408 for the nine months ended June 30, 2013, an increase of
$2,596. The increase in operating expense for the nine months ended June 30,
2014 compared to June 30, 2013 was due primarily to an increase of $1,690 in
general and administrative costs and an increase of $906 in professional fees.
Total interest expense was $663 for the nine months ended June 30, 2014 compared
to $2,673 for the nine months ended June 30, 2013, a decrease of $2,010.
For the reasons above, our net loss for the nine months ended June 30, 2014 was
$16,667 compared to $16,081 for the nine months ended June 30, 2013, an increase
of $586 or approximately 4%.
LIQUIDITY AND CAPITAL RESOURCES
We believe that our existing sources of liquidity will not be sufficient to fund
our operations, anticipated capital expenditures, working capital and other
financing requirements for at least the next twelve months. In the event the
Company is unable to achieve profitable operations in the near term, it may
require additional equity and/or debt financing, or reduce expenses, including
officer's compensation, to reduce such losses. However, we cannot assure that
such financing will be available to us on favorable terms, or at all. We will
continue to monitor our expenditures and cash flow position. At some time in the
future, however, we may need to obtain additional financing to complete our
business plan. There is no assurance that we will be able to obtain such
financing if needed and the failure to do so could negatively impact the
viability of our Company to continue with this business and the business may
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The following table summarizes total assets, accumulated deficit, stockholder's
equity (deficit) and working capital at June 30, 2014:
June 30, 2014
Total Assets $ 0
Accumulated (Deficit) $ (111,883 )
Stockholders' Equity (Deficit) $ (31,351 )
Working Capital (Deficit) $ (31,351 )
Since our inception, we have incurred an accumulated deficit of $111,883. Our
cash and cash equivalent balances were $0 at June 30, 2014. As of June 30, 2014
we had negative working capital of $31,351 and total current liabilities were
Net cash used in operating activities totaled $25,997 for the nine months ended
June 30, 2014. Operating expenses were $16,004 for the nine months ended June
30, 2014, and primarily consisted general and administrative expenses and
professional fees incurred in preparing our filings for the Securities and
Exchange Commission ("SEC").
Net cash provided by financing activities totaled $25,997 for the nine months
ended June 30, 2014.
During the nine months ended June 30, 2014 Mr. Montrone advanced the Company
$10. On October 13, 2013 Mr. Montrone forgave and released the Company of this
debt. Amount forgiven was recorded as additional paid in capital.
During the nine months ended June 30, 2014, the Company has received short term
loans totaling $25,996 from Highline Research Group, in exchange for unsecured
promissory notes carrying 5% interest, due on demand.
Since inception, our capital needs have entirely been met by these sales of
stock and short term debt financings.
Satisfaction of Our Cash Obligations for the Next Twelve Months
Our plan for satisfying our cash requirements for the next twelve months is
through generating revenue from TOCNC Tags, sale of shares of our common stock,
third party financing, and/or traditional bank financing. Consequently, we
intend to make appropriate plans to insure sources of additional capital in the
future to fund growth and expansion through additional equity or debt financing
or credit facilities.
We will have additional capital requirements during the fiscal year ending
September 30, 2014. We do not expect to be able to satisfy our cash requirements
through our product sales, and therefore we will attempt to raise additional
capital through the sale of our common stock and debt financing activities.
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We cannot assure that we will have sufficient capital to finance our growth and
business operations or that such capital will be available on terms that are
favorable to us or at all. We are currently incurring operating deficits that
are expected to continue for the foreseeable future.
Based on our current operating plan, we do not expect to generate revenue that
is sufficient to cover our expenses for at least the next twelve months. In
addition, we do not have sufficient cash and cash equivalents to execute our
operations for at least the next twelve months. We will need to obtain
additional financing to conduct our day-to-day operations, and to fully execute
our business plan. We will raise the capital necessary to fund our business
through a subsequent offering of equity securities. Additional financing,
whether through public or private equity or debt financing, arrangements with
security holders or other sources to fund operations, may not be available, or
if available, may be on terms unacceptable to us.
Our ability to maintain sufficient liquidity is dependent on our ability to
raise additional capital. If we issue additional equity securities to raise
funds, the ownership percentage of our existing security holders would be
reduced. New investors may demand rights, preferences or privileges senior to
those of existing holders of our common stock. Debt incurred by us would be
senior to equity in the ability of debt holders to make claims on our assets.
The terms of any debt issued could impose restrictions on our operations. If
adequate funds are not available to satisfy either short or long-term capital
requirements, our operations and liquidity could be materially adversely
affected and we could be forced to cease operations.
The rate of inflation has had little impact on the Company's results of
operations and is not expected to have a significant impact on the continuing
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
Critical Accounting Policies
We have identified the policies outlined below as critical to our business
operations and an understanding of our results of operations. The list is not
intended to be a comprehensive list of all of our accounting policies. In many
cases, the accounting treatment of a particular transaction is specifically
dictated by accounting principles generally accepted in the United States, with
no need for management's judgment in their application. The impact and any
associated risks related to these policies on our business operations is
discussed throughout management's Discussion and Analysis or Plan of Operation
where such policies affect our reported and expected financial results. Note
that our preparation of the financial statements requires us to make estimates
and assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of our financial
statements, and the reported amounts of revenue and expenses during the
reporting period. There can be no assurance that actual results will not differ
from those estimates.
Sales are recorded when products are shipped to customers and collectability is
reasonably assured. Provisions for discounts and rebates to customers, estimated
returns and allowances, and other adjustments are provided for in the same
period the related sales are recorded. The Company defers any revenue from sales
for which payment has been received, but shipment to our customers has not
occurred. The Company has not recorded revenues to date.
Recently Issued Accounting Pronouncements
In June 2014, FASB issued and the Company adopted Accounting Standards Update
(ASU) No. 2014-10, Development Stage Entities (Topic 915): Elimination of
Certain Financial Reporting Requirements, Including an Amendment to Variable
Interest Entities Guidance in Topic 810, Consolidation. The amendments in this
ASU remove all incremental financial reporting requirements from U.S. GAAP for
development stage entities, including the removal of Topic 915, Development
Stage Entities, from the FASB Accounting Standards Codificatio®. A development
stage entity is one that devotes substantially all of its efforts to
establishing a new business and for which: (a) planned principal operations have
not commenced; or (b) planned principal operations have commenced, but have
produced no significant revenue. For example, many start-ups or even long-lived
organizations that have not yet begun their principal operations or do not have
significant revenue would be identified as development stage entities. For
public business entities, the presentation and disclosure requirements in Topic
915 will no longer be required for the first annual period beginning after
December 15, 2014. The revised consolidation standards are effective one year
later, in annual periods beginning after December 15, 2015. Early adoption is
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In July 2013, FASB issued ASU No. 2013-11, "Presentation of an Unrecognized Tax
Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax
Credit Carryforward Exists." The provisions of ASU No. 2013-11 require an entity
to present an unrecognized tax benefit, or portion thereof, in the statement of
financial position as a reduction to a deferred tax asset for a net operating
loss carryforward or a tax credit carryforward, with certain exceptions related
to availability. ASU No. 2013-11 is effective for interim and annual reporting
periods beginning after December 15, 2013. The adoption of ASU No. 2013-11 is
not expected to have a material impact on the Company's Consolidated Financial
In February 2013, the Financial Accounting Standards Board (FASB) issued
Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220):
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,
to improve the transparency of reporting these reclassifications. Other
comprehensive income includes gains and losses that are initially excluded from
net income for an accounting period. Those gains and losses are later
reclassified out of accumulated other comprehensive income into net income. The
amendments in the ASU do not change the current requirements for reporting net
income or other comprehensive income in financial statements. All of the
information that this ASU requires already is required to be disclosed elsewhere
in the financial statements under U.S. GAAP. The new amendments will require an
- Present (either on the face of the statement where net income is presented or
in the notes) the effects on the line items of net income of significant
amounts reclassified out of accumulated other comprehensive income - but only
if the item reclassified is required under U.S. GAAP to be reclassified to net
income in its entirety in the same reporting period; and
- Cross-reference to other disclosures currently required under U.S. GAAP for
other reclassification items (that are not required under U.S. GAAP) to be
reclassified directly to net income in their entirety in the same reporting
period. This would be the case when a portion of the amount reclassified out
of accumulated other comprehensive income is initially transferred to a
balance sheet account (e.g., inventory for pension-related amounts) instead of
directly to income or expense.
The amendments apply to all public and private companies that report items of
other comprehensive income. Public companies are required to comply with these
amendments for all reporting periods (interim and annual). The amendments are
effective for reporting periods beginning after December 15, 2012, for public
companies. Early adoption is permitted. The adoption of ASU No. 2013-02 is not
expected to have a material impact on our financial position or results of
In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210):
Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities,
which clarifies which instruments and transactions are subject to the offsetting
disclosure requirements originally established by ASU 2011-11. The new ASU
addresses preparer concerns that the scope of the disclosure requirements under
ASU 2011-11 was overly broad and imposed unintended costs that were not
commensurate with estimated benefits to financial statement users. In choosing
to narrow the scope of the offsetting disclosures, the Board determined that it
could make them more operable and cost effective for preparers while still
giving financial statement users sufficient information to analyze the most
significant presentation differences between financial statements prepared in
accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the
amendments in this update will be effective for fiscal periods beginning on, or
after January 1, 2013. The adoption of ASU 2013-01 is not expected to have a
material impact on our financial position or results of operations.
In October 2012, the FASB issued Accounting Standards Update ASU 2012-04,
"Technical Corrections and Improvements" in Accounting Standards Update No.
2012-04. The amendments in this update cover a wide range of Topics in the
Accounting Standards Codification. These amendments include technical
corrections and improvements to the Accounting Standards Codification and
conforming amendments related to fair value measurements. The amendments in this
update will be effective for fiscal periods beginning after December 15, 2012.
The adoption of ASU 2012-04 is not expected to have a material impact on our
financial position or results of operations.
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