Business context and reporting period
This is SMSA Ballinger Acquisition Corp.’s unaudited Form 10-Q for the quarter ended June 30, 2015, filed August 7, 2015. The request identifies REALLOYS INC.; that company name does not match the registrant named in the filing. SMSA describes itself as a shell and development-stage company seeking to market Snotarator and Snotaphant nasal aspirators in South America, initially Brazil and Chile. Its exclusive distribution agreement was extended through May 15, 2017.
Financial results and liquidity
| Metric | Three months ended June 30, 2015 | Six months ended June 30, 2015 | Comparable 2014 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Expenses | $15,171 | $24,282 | $1,691 and $7,458, respectively |
| Net loss | $15,171 | $24,282 | $1,691 and $7,458, respectively |
| Basic and diluted loss per share | $0.00 loss (rounded) | $0.00 loss (rounded) | $0.00 loss (rounded) |
At June 30, 2015, cash was $44, accounts payable and accrued expenses were $21,082, total liabilities were $21,082, and stockholders’ deficit was $21,038. Working capital was negative $21,038, compared with negative $1,381 at December 31, 2014. There was no debt reported. For the six months, operating cash use was $4,700; related parties contributed $4,625 as additional paid-in capital. Cash declined by $75 from $119 to $44. No meaningful margin measure is applicable because the company had no sales.
Material changes versus the prior comparable period
- Six-month net loss increased to $24,282 from $7,458, mainly reflecting higher professional fees. Second-quarter expenses rose to $15,171 from $1,691 in 2014.
- Accounts payable and accrued expenses rose to $21,082 from $1,500 at year-end 2014, while cash fell to $44 from $119.
- The distributor agreement was extended two years, but product enhancements delayed completion of initial market research, now expected by year-end 2015.
Outlook, risks and other notable items
- Management estimates it needs up to $50,000 over the next 12 months for working capital, reporting costs and initial market research. It believes the majority stockholder may provide up to that amount, but no binding commitment exists.
- Management estimates at least $500,000 is needed to establish a viable Brazil/Chile distribution system, conditional on favorable market interest. It anticipated seeking that funding by June 30, 2016 and implementing distribution by December 31, 2016. Funding is not assured.
- The company has no sales, no operating assets and nominal cash. The filing cites the auditor’s going-concern substantial-doubt statement from the 2014 annual report. Without funding, the company may delay cash-intensive activities or become dormant.
- There are no existing arrangements with sales or distribution firms, or with entities to manufacture, market or distribute the products. The business depends heavily on its sole officer/director, who has no employment agreement and devotes time as she deems necessary.
- Management reported disclosure controls were ineffective due to an inherent weakness associated with shell-company status and having a sole officer and director; no significant control changes occurred during the quarter.
- Potential dilution is material: management anticipates that financing could involve issuing a significant majority of authorized common-stock voting power and may include preferred stock with senior rights.
- No legal proceedings were reported. The filing states no identified current market-risk exposure.
Important facts for investors to verify
- Confirm the issuer’s identity: the filing is for SMSA Ballinger Acquisition Corp., not REALLOYS INC.
- Verify whether the majority stockholder provided the expected working capital and whether the proposed $500,000 financing was obtained, including its terms and dilution.
- Check progress on market research, retail interest, product readiness, and securing sales, distribution and manufacturing arrangements.
- Review subsequent filings for liquidity changes, rising payables, going-concern disclosures and remediation of ineffective disclosure controls.