SEC Filing Summary: Real Estate Restoration and Rental, Inc.
Business Context and Reporting Period
This Form 10-K covers the fiscal year ended June 30, 2011, for Real Estate Restoration and Rental, Inc. (the "Company"), a Nevada corporation. The Company is classified as a shell company and a smaller reporting company in the development stage. Its business model focuses on providing renovation, marketing, and management services for foreclosed and distressed vacation rental properties in North and South Carolina, targeting partnerships with real estate developers and hedge funds. The Company also holds a patent license for green energy solutions (Frigitek) intended for residential application.
Key Financial Metrics
| Metric | Year Ended June 30, 2011 | Inception to June 30, 2011 |
|---|---|---|
| Revenue | $0 | $0 |
| Net Loss | $(147,817) | $(185,742) |
| Operating Expenses | $147,817 | $185,742 |
| Cash Balance (End of Period) | $1,775 | $1,775 |
| Net Cash Used in Operations | $(109,425) | $(139,150) |
| Total Assets | $4,275 | $4,275 |
| Total Liabilities | $10,692 | $10,692 |
| Stockholders' Equity (Deficiency) | $(6,417) | $(6,417) |
Expense Breakdown (FY 2011): Professional fees ($98,860), General and Administrative ($21,414), and Impairment of Licensing Rights ($27,723).
Material Changes vs. Prior Period
- Liquidity Deterioration: Cash on hand plummeted from $141,125 at June 30, 2010, to $1,775 at June 30, 2011, due to significant operating burn and a lack of revenue.
- Asset Impairment: The Company recognized a full impairment of $27,723 on its intangible licensing rights (Madison Energy Group) during the fiscal year, reducing the asset value to zero. Management does not anticipate further material payments from this agreement.
- Equity Deficiency: The Company moved from positive stockholders' equity of $136,125 in 2010 to a deficit of $(6,417) in 2011.
- Operational Status: The Company failed to secure any management contracts or generate revenue, missing its goal of having three vacation homes under management by summer 2011. Operations are currently limited to two part-time employees.
Outlook, Risks, and Management Commentary
Going Concern: The independent auditors have issued a report raising substantial doubt about the Company's ability to continue as a going concern. This is due to the Company's development stage status, minimal operations, and cumulative net loss of $185,742 since inception.
Capital Needs: Management explicitly states that current cash resources are insufficient to sustain operations. The Company anticipates needing to raise additional capital through equity financing (private placement) to implement its business plan. Failure to secure funding may force the suspension or cessation of operations.
Strategic Pivot: Due to a slow recovery in the vacation home market, the Company has delayed its target for managing properties until August 2012. It plans to increase marketing budgets to $2,500/month starting in January 2012, contingent on securing service fees.
Risks: Key risks include the inability to secure clients, the failure of the green energy licensing strategy to generate royalties, and the potential dilution of existing shareholders if new equity is issued.
Investor Verification Checklist
- Cash Runway: Verify if the Company has secured any new funding since the filing date, given the cash balance of only $1,775 and a working capital deficiency.
- Revenue Generation: Confirm if the Company has signed any of the targeted contracts with real estate developers or hedge funds to manage distressed properties.
- Related Party Transactions: Note that the President/CEO (Deborah Lovig) owns approximately 73.5% of the outstanding shares and provides office space at no cost; verify the valuation of in-kind services contributed by shareholders.
- Asset Value: Confirm the status of the Madison Energy Group license agreement, which has been fully impaired and written off.
- Stock Liquidity: The stock trades on the OTC Bulletin Board under symbol "RERR"; verify current trading volume and bid/ask spreads.