| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Cautionary Statement Regarding Forward-Looking
Statements
This report contains “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Private Securities Litigation Reform Act
of 1995 provides a “safe harbor” for forward looking statements. Forward-looking statements are not statements of historical
facts, but rather reflect our current expectations concerning future events and results. The words “may,” “will,”
“anticipate,” “should,” “would,” “believe,” “contemplate,” “could,”
“project,” “predict,” “expect,” “estimate,” “continue,” and “intend,”
as well as other similar words and expressions of the future, are intended to identify forward-looking statements.
Factors that may cause actual results to differ
from those results expressed or implied, include, but are not limited to, those listed under “Risk Factors” in our Annual
Report on Form 10-K for the year ended December 31, 2021 filed by the Company with the Securities and Exchange Commission (the “SEC”)
on March 11, 2022.
These forward-looking statements generally relate
to our plans, objectives and expectations for future events and include statements about our expectations, beliefs, plans, objectives,
intentions, assumptions and other statements that are not historical facts. These statements are based upon our opinions and
estimates as of the date they are made. Although we believe that the expectations reflected in these forward-looking statements
are reasonable, such forward-looking statements are subject to known and unknown risks and uncertainties that may be beyond our control,
which could cause actual results, performance and achievements to differ materially from results, performance and achievements projected,
expected, expressed or implied by the forward-looking statements. While we cannot assess the future impact that any of these
differences could have on our business, financial condition, results of operations and cash flows or the market price of shares of our
common stock, the differences could be significant. You are cautioned not to unduly rely on such forward-looking statements when evaluating
the information presented in this report and you are urged to consider all such risks and uncertainties. In light of the uncertainty
inherent in such forward-looking statements, you should not consider their inclusion to be a representation that such forward-looking
matters will be achieved.
General Overview
The Company is a “shell company”,
as defined in Rule 12b-2 of the Exchange Act. Because we are a shell company, our stockholders are unable to utilize Rule 144
to sell “restricted stock” as defined in Rule 144 or to otherwise use Rule 144 to sell our securities, and we are ineligible
to utilize registration statements on Form S-3 or Form S-8 for so long as we remain a shell company and for 12 months thereafter. As
a consequence, among other things, the offering, issuance and sale of our securities is likely to be more expensive and time consuming
and may make our securities less attractive to investors.
The Company’s
Board of Directors is considering strategic uses for its funds to develop or acquire interests in one or more operating businesses. While
we have focused our development or acquisition efforts on sectors in which our management has expertise, we do not wish to limit ourselves
to, or to foreclose any opportunities in, any particular industry or sector. Prior to this use, the Company’s funds have
been, and we anticipate will continue to be, invested in high-grade, short-term investments (such as cash and cash equivalents) consistent
with the preservation of principal, maintenance of liquidity and avoidance of speculation, until such time as we need to utilize such
funds, or any portion thereof, for the purposes described above. The directors will also consider alternatives for distributing
some or all of its cash and cash equivalents to stockholders.
Results of operations
Three months ended June 30, 2022 compared to the three months
ended June 30, 2021
For the three months ended June 30, 2022, the
Company had a loss from operations before income taxes of $325,000 compared to a loss from operations before income taxes of $293,000
for the three months ended June 30, 2021.
The increased loss before income taxes of
$32,000 was primarily a result of an increase in Other operating expenses of $40,000 and an increase in Interest and other income of $3,000,
offset by a decrease of compensation and benefits of $5,000 for the three months ended June 30, 2022.
Compensation and benefits
For the three months ended June 30, 2022, Compensation
and benefits were $113,000 as compared to $118,000 for the three months ended June 30, 2021.
Other operating expenses
For the three months ended June 30, 2022, Other
operating expenses were $215,000 as compared to $175,000 for the three months ended June 30, 2021.
Income taxes
For the three months
ended June 30, 2022 and 2021, the Company recorded zero and approximately $1,000 income tax expense from operations, respectively. No
tax benefit has been recorded in relation to the pre-tax loss for the three months ended June 30, 2022 and 2021, due to a full valuation
allowance to offset any deferred tax asset related to net operating loss carry forwards attributable to the losses.
Six months ended June 30, 2022 compared to the six months ended
June 30, 2021
For the six months ended June 30, 2022, the Company
had a loss from operations before income taxes of $639,000 compared to a loss from operations before income taxes of $542,000 for the
six months ended June 30, 2021.
The increased loss before income taxes of
$97,000 was primarily the result of an increase in Other operating expenses of $41,000, and increase Compensation and benefits of $6,000,
offset by a decrease in Interest and other income of $50,000.
Compensation and benefits
For the six months ended June 30, 2022, Compensation
and benefits were $230,000 as compared to $224,000 for the six months ended June 30, 2021.
The increased Compensation and benefits of $6,000
is the result of an increase in salary expense for the six months ended June 30, 2022 in comparison to the six months ended June 30, 2021.
Other operating expenses
For the six months ended June 30, 2022, Other
operating expenses were $412,000 as compared to $371,000 for the six months ended June 30, 2021. The increased operating expenses of $41,000
were primarily the result of increased professional fees of $16,000, increased insurance expenses of $11,000, and increased other expenses
of $14,000.
Interest and other income
For the six months ended June 30, 2022, Interest
and other income was $3,000 as compared to $53,000 for the six months ended June 30, 2021. The decreased interest and other income of
$50,000 was primarily the result of increased interest income of $3,000, offset by decreased other income due to the extinguishment of
debt of $53,000 during the six months ended June 30, 2021.
Income taxes
For the six months ended
June 30, 2022 and 2021, the Company recorded zero and approximately $1,000 income tax expense from operations, respectively. No tax benefit
has been recorded in relation to the pre-tax loss for the six months ended June 30, 2022 and 2021, due to a full valuation allowance to
offset any deferred tax asset related to net operating loss carry forwards attributable to the losses.
Financial condition
Liquidity and Capital Resources
At June 30, 2022, the Company had cash and cash
equivalents totaling $4,768,000, which it intends to use to acquire interests in one or more operating
businesses, to fund the Company’s general and administrative expenses, and the directors will also consider alternatives for distributing
some or all of its cash and cash equivalents to stockholders. The Company believes that its working capital is sufficient to support its
operating requirements through September 30, 2023.
Cash equivalents represent short-term, highly
liquid investments, which are readily convertible to cash and have maturities of three months or less at time of purchase. Please refer
to note 4 for valuation of Investments.
The decrease in cash and cash equivalents of $628,000
for the quarter ended June 30, 2022 was primarily the result $580,000 used in operating activities and the repurchase of Treasury stock
for $48,000.