UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q
___________________
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2017
Commission file number: 0-55320
Africa Growth Corporation
(Exact Name Of Registrant As Specified In Its Charter)
| Nevada | 27-2413875 |
| (State of Incorporation) | (I.R.S. Employer Identification No.) |
| | |
| 41 Cedar Avenue, 5th Floor, Hamilton, Bermuda | HM 12 |
| (Address of Principal Executive Offices) | (ZIP Code) |
Registrant's Telephone Number, Including Area Code: +44 (0) 203 862 2922
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ¨ | Accelerated filer ¨ | Non-Accelerated filer ¨ | Smaller reporting company x | Emerging growth company ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The number of shares outstanding of each of the issuer's classes of equity as of May 15, 2017 is 996,747 shares of common stock.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS Back to Table of Contents
Africa Growth Corporation |
Consolidated Balance Sheets |
| (Unaudited) |
| Back to Table of Contents |
| |
| | | | |
| | | |
| Current assets: | | | |
Cash and cash equivalents | $ | 10 | | $ | - |
| $ | 10 | | $ | 10 |
| | | | | |
LIABILITIES AND STOCKHOLDER'S DEFICIT | | | | | |
| | | | | | |
| | | | | |
| Accounts payable and accrued expenses | $ | 36,362 | | $ | 20,880 |
| Accounts payable - related party | | 28,694 | | | 18,100 |
Total current liabilities | | 65,056 | | | 38,980 |
| | | | | | |
Commitments and contingencies | | - | | | - |
| | | | | | |
| | | | | |
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding | | - | | | - |
Common stock, $0.0001 par value, 200,000,000 shares authorized, | | | | | |
998,060 shares issued and outstanding | | 100 | | | 100 |
Less: treasury stock, at cost; 1,313 shares | | (4,728) | | | (4,728) |
Additional paid-in capital | | 1,005,711 | | | 1,005,711 |
| | (1,066,129) | | | (1,040,053) |
Total stockholder's deficit | | (65,046) | | | (38,970) |
Total liabilities and stockholder's deficit | $ | 10 | | $ | 10 |
| |
See accompanying notes to the unaudited consolidated financial statements. |
Page 4
Africa Growth Corporation |
Consolidated Statements of Operations |
For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| Back to Table of Contents |
| For the Three Months Ended March 31, |
| | | | |
| | | | |
| | | | | |
General and administrative | $ | 26,076 | | $ | 32,851 |
| | 26,076 | | | 32,851 |
| | | | | | |
| $ | (26,076) | | $ | (32,851) |
| | | | | | |
Net loss per common share - basic and diluted | $ | (0.03) | | $ | (0.05) |
| | | | | | |
Weighted average number of common shares outstanding - basic and diluted | | 998,060 | | | 641,468 |
| |
| See accompanying notes to the unaudited consolidated financial statements. |
Page 5
Africa Growth Corporation |
Consolidated Statements of Cash Flows |
For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| Back to Table of Contents |
| For the Three Months Ended March 31, |
| | | | |
| | | | |
Cash flows from operating activities: | | | |
| $ | (26,076) | | $ | (32,851) |
| Adjustments to reconcile net loss to cash used in operating activities: | | | | | |
| | | | | | |
| Changes in operating assets and liabilities: | | | | | |
| Accounts payable and accrued expenses | | 15,482 | | | 250 |
| Net cash used in operating activities | | (10,594) | | | (32,601) |
| | | | | | |
Cash flows from financing activities: | | | | | |
| Advances from related party, net | | 10,594 | | | - |
Net cash provided by financing activities - continuing operations | | 10,594 | | | - |
| Net cash provided by financing activities - discontinued operations | | - | | | 33,150 |
| Net cash provided by financing activities | | 10,594 | | | 33,150 |
| | | | | | |
| | - | | | 549 |
Cash and cash equivalents, beginning of period | | 10 | | | 51 |
Cash and cash equivalents, end of period | $ | 10 | | $ | 600 |
| | | | | | |
Supplemental disclosures: | | | | | |
| $ | - | | $ | - |
| $ | - | | $ | - |
| | | | | | |
| See accompanying notes to the unaudited consolidated financial statements. | | | | | |
Page 6
AFRICA GROWTH CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
Back to Table of Contents
Note 1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim consolidated financial statements of Africa Growth Corporation ("AGC") have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in AGC's Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2016. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the unaudited interim consolidated financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year as reported in the Form 10-K have been omitted.
Organization, Ownership and Business
Africa Growth Corporation (formerly known as Brenham Oil & Gas Corp. (hereinafter the "Company", the "Registrant", or "AGC"), a Nevada corporation, was incorporated on April 21, 2010.
On November 9, 2016, the Company filed an amended Preliminary Information Statement on Schedule 14C with full disclosure required by Items 11 through 14 of Schedule 14A, including but not limited to the audited financial statements of the Registrant and AIC as well as the pro forma consolidated financial statements of the Registrant and AIC as required by Schedule 14A together with additional disclosure regarding the business of AIC. Further, in connection with the Closing the Registrant's Board of Directors effected the change of control of the Registrant.
On December 12, 2016, the Company filed the Definitive Preliminary Information Statement on Schedule 14C.
In December 2016, the Company issued 71,206,464 shares of common stock to Crescat Ventures Ltd, as a part issuance in connection with the Merger.
On January 17, 2017, pursuant to the Contribution Agreement filed as Exhibit 2.2 of the Merger Agreement form 8-K, AIII assumed all of the Company's existing liabilities in consideration and exchange for the Company assigning to a nominee of AIII all of the Company's existing developed and undeveloped oil and gas assets. As of December 31, 2016, the Company's oil and gas operations as well as the related liabilities were considered discontinued operations.
On January 30, 2017, the Company completed a one-for-two hundred reverse split of its 199,500,000 shares of issued and outstanding common stock (the "Reverse Split"). Further on this date the Company's name was changed to Africa Growth Capital. All the outstanding shares have been retrospectively adjusted to reflect the reverse stock split as required by the terms of such securities with a proportional increase in the related share price.
On February 21, 2017, the Company paid $5,000 to AIII for merger related expenses incurred by AIII.
On April 10, 2017, the Company incorporated a new subsidiary, Namibia Mortgage Acceptance Corporation a Delaware incorporated company, to launch the Company's lower and middle income mortgage acceptance business in Namibia and for funding purposes to facilitate the Company's intention launch a Regulation D (506(c)) offering with the U.S. Securities and Exchange Commission (SEC). The purpose of the offering is to secure funds through accredited investors to facilitate access to financing solutions and promote homeownership in Namibia.
The Company is in the process of completing the remaining steps to finalize the merger between Africa Growth Corporation and Africa International Capital Ltd. The resulting merger financial statements are to be filed thereafter.
Use of Estimates
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Going Concern
The consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.
Prior to the execution of the merger agreement the Company generated losses with negligible revenues and did not anticipate generating any revenues in the near-term, which raised substantial doubt about the Company's ability to continue to operate as a going concern.
As of March 31, 2017, there remains substantial doubt about the Company's ability to continue to operate as a going concern for the twelve months following the filing of these financial statements. The Company transferred its oil and gas assets to a nominee of AII under the contribution and merger agreements and is in the process of finalizing of the merger with AIC.
Post-merger the Company intends to continue as a going concern through the underlying operating and revenue generating business of AIC and external financing, should it be required and available. These financials do not include any adjustments relating to the recoverability and reclassification of recorded asset amounts, or amounts and classifications of liabilities that might result from this uncertainty.
Cash and Cash Equivalents
AGC considers all short-term securities purchased with a maturity of three months or less to be cash equivalents.
Income Taxes
The Company is a taxable entity and recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to be in effect when the temporary differences reverse. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the enactment date of the rate change. A valuation allowance is used to reduce deferred tax assets to the amount that is more likely than not to be realized. Interest and penalties associated with income taxes are included in selling, general and administrative expense.
The Company has adopted ASC 740-10 "Accounting for Uncertainty in Income Taxes," which prescribes a comprehensive model of how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. ASC 740-10 states that a tax benefit from an uncertain position may be recognized if it is "more likely than not" that the position is sustainable, based upon its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. As of March 31, 2017, AGC had not recorded any tax benefits from uncertain tax positions.
Net Loss Per Common Share
Net loss per common share is computed by dividing the net loss by the weighted average number of shares outstanding during a period. The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. Basic and diluted net losses per share were the same, as there were no common stock equivalents outstanding.
Reclassifications
Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation including adjustments to reflect the presentation of discontinued operations related to the merger described above.
Recent Accounting Pronouncements
The Company adopted an ASU issued by the FASB requiring, when applicable, disclosures regarding uncertainties about an entity's ability to continue as a going concern. During the preparation of quarterly and annual financial statements, management should evaluate whether conditions or events exist that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date the financial statements are issued. If this evaluation indicates that it is probable that an entity will be unable to meet its obligations when they become due within one year of the financial statement issuance date, management must evaluate whether its mitigation plans will alleviate the substantial doubt of continuing as a going concern. If substantial doubt exists, regardless of whether the mitigation plan alleviates the concern, additional disclosures are required in the financial statements addressing the conditions or events that raise substantial doubt, management's evaluation of the significance of those conditions or events, and management's mitigation plans.
Subsequent Events
The Company has evaluated all transactions through the date the consolidated financial statements were issued for subsequent event disclosure consideration.
Note 2. Accounts Payable - Related Parties
Related party accounts payable at March 31, 2017 consists of $28,694 (December 31, 2016: $18,100) owed to AIC for the funding of the Company's operations.
The advances to the Company are non-interest bearing and due on demand.
Page 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION Back to Table of Contents
As used in this Quarterly Report, the terms "we", "us", "our" and the "Company" means Africa Growth Corporation a Nevada corporation. To the extent that we make any forward-looking statements in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report, we emphasize that forward-looking statements involve risks and uncertainties and our actual results may differ materially from those expressed or implied by our forward-looking statements. Our forward-looking statements in this Quarterly Report reflect our current views about future events and are based on assumptions and are subject to risks and uncertainties. Generally, forward-looking statements include phrases with words such as "expect", "anticipate", "intend", "plan", "believe", "seek", "estimate" and similar expressions to identify forward-looking statements.
The following disclosure in Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help you understand our historical results of operations during the periods presented and our financial condition. This MD&A should be read in conjunction with our consolidated financial statements and the accompanying notes to consolidated financial statements for the years ended December 31, 2016 and 2015. It should be understood that as a result of the expected Closing of the Merger Agreement with AIC in April 2017 our historical results are not expected to be indicative of our future results.
Recent Developments
On April 25, 2016, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with Africa International Capital Ltd., a Bermuda corporation ("AIC") pursuant to which a wholly-owned subsidiary of the Registrant will be merged into AIC which will be the surviving entity and will become a subsidiary of the Registrant. The Registrant expects the Merger Agreement to close in the second quarter of 2017.
In addition, on April 25, 2016, the Registrant also entered into a Contribution Agreement with its corporate parent and principal shareholder, American International Industries, Inc., a Nevada corporation ("AIII"), pursuant to which, at the closing of the Merger, AIII will assume all of Brenham's existing liabilities and working capital at the Closing in consideration and exchange for Brenham assigning to AIII all of Brenham's existing developed and undeveloped oil and gas assets.
Three Months Ended March 31, 2017 versus Three Months Ended March 31, 2016
Net loss for the three months ended March 31,2017 was $26,076, compared to $32,857 for the three months ended March 31, 2016 and consisted primarily of general and administrative legal and professional expenses.
Due to the discontinuation of the operation of the oil and gas leases in 2016 and subsequent transfer to AIII in relation to the merger, there were no oil and gas revenues or operating expenses recorded.
Liquidity and Capital Resources
At March 31, 2017 and December 31, 2016, total assets were $10, respectively. At March 31, 2017, total liabilities were $65,056, consisting of $36,362 in accounts payable and accrued expenses and $28,694 of accounts payable to related parties. At December 31, 2016, total liabilities were $38,980, consisting of $20,880 in accounts payable and accrued expenses and $18,100 in accounts payable to related parties.
For the three months ended March 31 2017 and 2016, we had no cash flows from investing activities.
We had cash flow used in operations of $10,594 during the three months ended March 31, 2017, principally due to a net loss of $26,076. We had cash used in operations of $32,601 during the three months ended March 31, 2016, principally due to a net loss of $32,851. The losses in 2017 were supported by related parties who provided financing of $10,594. The prior period financing activities were provided by AIII now recorded as a discontinued operation following the transfer of the oil and gas properties to AIII.
Please refer to the Definitive Information Statement on Schedule 14C filed on December 12, 2016 for discussion on the Company's post-merger financial condition and liquidity.
Contractual Obligations
As of March 31, 2017, the Company did not have any contractual obligations.
Off-Balance Sheet Arrangements
As of March 31, 2017, and December 31, 2016, the Company did not have any off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Back to Table of Contents
The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. The disclosures are not meant to be precise indicators of expected future results, but rather indicators of reasonably possible results. This forward-looking information provides indicators of how we view and manage our ongoing market risk exposures. All of our market risk sensitive instruments will be entered into for purposes of risk management and not for speculation.
Reference is made and incorporated herein to the amended Preliminary Information Statement on Schedule 14C filed on November 9, 2016 for discussion on AGC's post-merger financial condition and liquidity.
ITEM 4. CONTROLS AND PROCEDURES Back to Table of Contents
Evaluation of disclosure controls and procedures.
As of March 31, 2017, the Company's chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures as provided under the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013), our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report.
Changes in internal controls.
During the quarterly period covered by this report, no changes occurred in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
