Attached files
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EX-31.2 - GCA I ACQUISITION CORP | v208418_ex31-2.htm |
EX-32.1 - GCA I ACQUISITION CORP | v208418_ex32-1.htm |
EX-31.1 - GCA I ACQUISITION CORP | v208418_ex31-1.htm |
EX-32.2 - GCA I ACQUISITION CORP | v208418_ex32-2.htm |
U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x QUARTERLY REPORT
PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the
quarterly period ended November 30, 2010
¨ TRANSITION REPORT
PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the
transition period from __________ to __________
Commission
file number 000-52431
GCA
I ACQUISITION CORP.
(Exact
name of small business issuer as specified in its charter)
Delaware
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14-1973529
|
|
(State
or other jurisdiction of
|
(I.R.S.
employer
|
|
incorporation
or organization)
|
Identification
number)
|
115
East 57th
Street, 11th
Floor
New York, NY
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10022
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Issuer's
telephone number, including area code: (646) 486-9770
No
Change
(Former
name, former address and former
fiscal
year, if changed since last report)
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.
x
Yes ¨ No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated file. See definition of accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
|
Non-accelerated
filer o
|
(Do
not check if a smaller reporting company)
|
Smaller
reporting company x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
x
Yes ¨ No
APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. ¨
Yes ¨
No
APPLICABLE
ONLY TO CORPORATE ISSUERS
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date: 5,000,000 shares of Common Stock, par
value $.0001 per share, outstanding as of January 19, 2011.
QUARTERLY
REPORT ON FORM 10-Q
FOR
FISCAL QUARTER ENDED NOVEMBER 30, 2010
-
INDEX -
Page
|
|
Item
1. Financial Statements:
|
1
|
Balance
Sheets – November 30, 2010 (unaudited) and May 31, 2010
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F-1
|
Statement
of Operations (unaudited) for the six month period ending November 30,
2010, for the six month period ending November 30, 2009, for the three
month period ending November 30, 2010, for the three month period ending
November 30, 2009, and for the cumulative period during the development
stage from August 14, 2006 (inception) to November 30,
2010
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F-2
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Statement
of Cash Flows (unaudited) for the six month period ending November 30,
2010, for the six month period ending November 30, 2009, and for the
cumulative period during the development stage from August 14, 2006
(inception) to November 30, 2010
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F-3
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Notes
to Unaudited Financial Statements
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F-4
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Item
2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
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2
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Item
3. Quantitative and Qualitative Disclosures About
Market Risk
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14
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Item
4. Controls and Procedures
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14
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15 | |
15
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Item
1A. Risk Factors
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15
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15
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|
15
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|
15
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|
15
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|
15
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17
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Item
1. Financial Statements.
The
accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
in accordance with the instructions for Form 10-Q. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the
opinion of management, the financial statements contain all material
adjustments, consisting only of normal recurring adjustments necessary to
present fairly the financial condition, results of operations, and cash flows of
the Company for the interim periods presented.
The
results for the period ended November 30, 2010 are not necessarily indicative of
the results of operations for the full year. These financial
statements and related footnotes should be read in conjunction with the
financial statements and footnotes thereto included in the Company’s annual
report on Form 10-K filed with the Securities and Exchange Commission for the
period ended May 31, 2010.
1
GCA
I ACQUISITION CORP.
(A
Development Stage Company)
CONSOLIDATED
BALANCE SHEETS
November 30, 2010
|
May 31, 2010
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|||||||
(Unaudited)
|
(1)
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 9,234 | $ | 3 | ||||
Other
receivable, net of allowance for doubtful accounts of $28,358 and $0at
November 30, 2010 and May 31, 2010, respectively
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- | 293,325 | ||||||
Total
current assets
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$ | 9,234 | $ | 293,328 | ||||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
$ | 46,068 | $ | 307,384 | ||||
Notes
payable to a stockholder, including accrued interest of $5,424 and $4,662
at November 30, 2010 and May 31, 2010,
respectively
|
37,524 | 36,762 | ||||||
Total
current liabilities
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83,592 | 344,146 | ||||||
Stockholders'
deficit
|
||||||||
Preferred
stock; $.0001 par value, 20,000,000 shares authorized, none issued
and outstanding
|
- | - | ||||||
Common
stock; $.0001 par value, 100,000,000 shares authorized, 5,000,000
issued and outstanding at November 30, and May 31, 2010,
respectively
|
500 | 500 | ||||||
Additional
paid-in capital
|
2,500 | - | ||||||
Deficit
accumulated during the development stage
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(77,358 | ) | (51,318 | ) | ||||
Total
stockholders' deficit
|
(74,358 | ) | (50,818 | ) | ||||
Total
liabilities and stockholders' deficit
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$ | 9,234 | $ | 293,328 |
(1)
Derived from audited financial statements
See
accompanying notes to unaudited consolidated financial
statements
F-1
GCA
I ACQUISITION CORP.
(A
Development Stage Company)
CONSOLIDATED
STATEMENTS OF OPERATIONS
For the six month
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For the three month
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For the period from
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||||||||||||||||||
period ending November 30,
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period ending November 30,
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August 14, 2006 (Inception)
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||||||||||||||||||
2010
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2009
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2010
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2009
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to November 30, 2010
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||||||||||||||||
(Unaudited)
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(Unaudited)
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(Unaudited)
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(Unaudited)
|
(Unaudited)
|
||||||||||||||||
Operating
expenses:
|
||||||||||||||||||||
Selling,
general, and administrative expenses
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$ | 19,273 | $ | 183,722 | $ | 5,656 | $ | 149,711 | $ | 827,739 | ||||||||||
Reimbursed
expenses, net
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6,005 | (78,337 | ) | 30,405 | (46,390 | ) | (755,805 | ) | ||||||||||||
Selling,
general, and administrative expenses, net
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25,278 | 105,385 | 36,061 | 103,321 | 71,934 | |||||||||||||||
Other
expense:
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||||||||||||||||||||
Interest
expense-related party
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762 | 762 | 381 | 381 | 5,424 | |||||||||||||||
Net
loss
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$ | (26,040 | ) | $ | (106,147 | ) | $ | (36,442 | ) | $ | (103,702 | ) | $ | (77,358 | ) | |||||
Basic
and diluted loss per common share
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$ | (0.01 | ) | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.02 | ) | ||||||||
Basic
and diluted weighted average common shares outstanding
|
5,000,000 | 5,000,000 | 5,000,000 | 5,000,000 |
See
accompanying notes to unaudited consolidated financial
statements
F-2
GCA
I ACQUISITION CORP.
(A
Development Stage Company)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
For the six month period
|
For the period from
|
|||||||||||
ending November 30,
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August 14, 2006 (Inception)
|
|||||||||||
2010
|
2009
|
to November 30, 2010
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||||||||||
(Unaudited)
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(Unaudited)
|
(Unaudited)
|
||||||||||
Cash flows from operating
activities:
|
||||||||||||
Net
loss
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$ | (26,040 | ) | $ | (103,702 | ) | $ | (77,358 | ) | |||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
Write
off of other receivable
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- | - | 17,585 | |||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Accrued
interest on promissory notes
|
762 | 762 | 5,424 | |||||||||
Decrease
(increase) in other receivable
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293,325 | 103,764 | (17,585 | ) | ||||||||
Increase
(decrease) in accounts payable and accrued expenses
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(261,316 | ) | (10,875 | ) | 46,068 | |||||||
Net
cash provided by (used in) operating activities
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6,731 | (10,051 | ) | (25,866 | ) | |||||||
Cash
flows from financing activities:
|
||||||||||||
Contribution
from shareholder
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2,500 | - | 2,500 | |||||||||
Proceeds
from issuance of promissory notes payable to stockholder
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- | - | 32,100 | |||||||||
Proceeds
from issuance of shares of common stock
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- | - | 500 | |||||||||
Net
cash provided by financing activities
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2,500 | - | 35,100 | |||||||||
Net
increase (decrease) in cash
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9,231 | (10,051 | ) | 9,234 | ||||||||
Cash,
beginning of period
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3 | 13,151 | - | |||||||||
Cash,
end of period
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$ | 9,234 | $ | 3,100 | $ | 9,234 | ||||||
Supplemental
disclosures of cash flow information:
|
||||||||||||
Cash
paid for interest
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$ | - | $ | - | $ | - | ||||||
Cash
paid for income taxes
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$ | - | $ | - | $ | - |
See
accompanying notes to unaudited consolidated financial
statements
F-3
GCA
I ACQUISITION CORP.
(A
Development Stage Company)
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
November
30, 2010 and 2009
Note
1 - Organization and Description of Business, Basis of Presentation and Going
Concern
Organization
and Description of Business
GCA I
Acquisition Corp. (the “Company”, “we,” “us,” “our”), a development stage
company as defined in ASC 915-10, was formed in Delaware on August 14, 2006. The
Company’s fiscal year end is May 31.
Since
inception, we have been engaged in organizational efforts, obtaining initial
financing, complying with reporting obligations under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and efforts to identify and
consummate a possible business combination with an existing operating
company. Until we are able to acquire or merge with an existing
operating company, our sole business purpose is to accomplish this
objective.
Based on
its proposed business activities, the Company is what is known as a “blank
check” company. The U.S. Securities and Exchange Commission (the
“SEC”) defines “blank check” companies as “any development stage company that is
issuing a penny stock, within the meaning of Section 3(a)(51) of the Exchange
Act, and that has no specific business plan or purpose, or has indicated that
its business plan is to merge with an unidentified company or
companies.” Under SEC Rule 12b-2 under the Securities Act of 1933, as
amended (the “Securities Act”), the Company also qualifies as a “shell company,”
because it has no or nominal assets and no or nominal
operations. Many states have enacted statutes, rules and regulations
limiting the sale of securities of “blank check” companies in their respective
jurisdictions. The Company’s management does not intend to undertake
any efforts to cause a market to develop in its securities, either debt or
equity, unless and until it has successfully concluded a business
combination. The Company intends to comply with the periodic
reporting requirements of the Exchange Act for so long as it continues to be
subject to those requirements.
Recent Key Developments
On May 7,
2008, we entered into a definitive Agreement and Plan of Merger to engage in a
reverse subsidiary merger with a target operating company, Bixby Energy Systems,
Inc. (“Bixby”), among other parties, which agreement was superceded as of March
27, 2009 by a definitive Amended and Restated Agreement and Plan of Merger which
agreement remains in effect as of the date hereof (as amended and restated, the
“Merger Agreement”). Throughout the balance of 2009 and continuing
for only a brief part of early 2010, our focus had been predominantly on
fulfilling our obligations under the Merger Agreement in pursuit of the
contemplated merger transaction (the “Pending Merger”), including the
preparation, filing with the U.S. Securities and Exchange Commission (the
“SEC”), and amending as necessary and re-filing of a related S-4
registration/merger proxy statement. During the first half of 2010, a
dispute arose between us and Bixby based on Bixby’s announced determination that
it desired to terminate the Merger Agreement and abandon the Pending Merger (the
“Bixby Dispute”).
Following
certain discussions between Bixby and GCA surrounding the Bixby Dispute and
potential terms upon which it might have been able to be resolved, a certain
Contingent Settlement & Standstill Agreement was entered into on July 1,
2010 among the parties to the Merger Agreement as well as each of our two common
stockholders pursuant to which all of the outstanding shares of our common stock
could potentially be sold to and become wholly-owned by Bixby, and the Merger
Agreement would potentially be terminated, both on or before September 15, 2010,
in the event that certain payments were made by Bixby as of that date, including
a payment to us sufficient to enable us to satisfy all of our then-existing
material financial obligations (as more fully described hereinafter, the
“Contingent Settlement Agreement”). Although certain payments were
made by Bixby under the Contingent Settlement Agreement, the time within which
Bixby had been given under such agreement to satisfy certain payment obligations
expired without such payments having been made, and, as such, no sale or other
conveyance of GCA common stock was effectuated, or will be effectuated, pursuant
thereto, and there is no longer a settlement agreement of any kind in place as
between Bixby and GCA or otherwise in connection with the Bixby
Dispute.
F-4
At this
time, there remains a high degree of uncertainty as to whether:
|
§
|
the
Bixby Dispute will be resolved in the near-term and whether any such
resolution might involve resumption of the Pending Merger and, if so, when
that might occur and when the Pending Merger might be consummated, if at
all; or
|
|
§
|
the
Bixby Dispute will continue unresolved and potentially come to involve
litigation, and whether, should this occur, the Pending Merger will be
abandoned by us, either by agreement or otherwise, and we will be able to
identify and consummate an alternative business combination with a
different operating company at some future
date.
|
In the
meantime, active pursuit of the Pending Merger has been suspended by us due to a
combination of non-payment by Bixby of their financial obligations to us under
the Merger Agreement, which is necessary for us to continue such pursuit, and
Bixby’s continued unwillingness to cooperate with us more generally in
continuing to work towards a closing. We continue as required under
the terms of the Merger Agreement, however, and for the time being, to remain
current in our reporting obligations under the Exchange Act.
Our
Business Generally
Based on
our proposed business activities, we are what is known as a “blank check”
company. The SEC defines “blank check” companies as “any development
stage company that is issuing a penny stock, within the meaning of Section
3(a)(51) of the Exchange Act, and that has no specific business plan or purpose,
or has indicated that its business plan is to merge with an unidentified company
or companies.” Under SEC Rule 12b-2 under the Securities Act of 1933,
as amended (the “Securities Act”), we also qualify as a “shell company,” because
we have no or nominal assets and no or nominal operations. Many
states have enacted statutes, rules and regulations limiting the sale of
securities of “blank check” companies in their respective
jurisdictions. Our management does not intend to undertake any
efforts to cause a market to develop in our securities, either debt or equity,
unless and until we have successfully concluded a business
combination. We intend to comply with the periodic reporting
requirements of the Exchange Act for so long as we continue to be subject to
those requirements.
We were
organized as a vehicle to investigate and, if such investigation warrants,
acquire a target company or business seeking the perceived advantages of being a
publicly-held corporation. Our principal business objective for the
next 12 months and beyond such time will be to achieve long-term growth
potential through a combination with an operating business rather than immediate
short-term earnings. Given the Pending Merger, and notwithstanding
the Bixby Dispute, we have curtailed for the time being our efforts in seeking
out alternative target companies with which to combine. However, to
the extent that the Pending Merger is not consummated for any reason and we
resume our business objectives of identifying a target company with which to
combine, we will not restrict our potential candidate target companies to any
specific business, industry or geographic location and may, as a result, acquire
any type of business.
To date,
the analysis of new business opportunities has been undertaken by or under the
supervision of Michael M. Membrado, our sole officer and
director. Until such time as we entered into the Merger
Agreement, we had had unrestricted flexibility in seeking, analyzing and
participating in potential business opportunities, and, in the event that the
Pending Merger is not consummated for any reason and we resume our business
objectives of identifying a target company with which to combine, we expect to
enjoy the same unrestricted flexibility. In our efforts to analyze
potential acquisition targets, we had considered, and will continue to consider
to the extent that the Pending Merger is not consummated for any reason and we
resume our business objectives of identifying a target company with which to
combine, the following kinds of factors:
F-5
(a)
Potential for growth, indicated by new technology, anticipated market
expansion or new products;
(b)
Competitive position as compared to other firms of similar size and
experience within the industry segment as well as within the industry as a
whole;
(c)
Strength and diversity of management, either in place or scheduled for
recruitment;
(d)
Capital requirements and anticipated availability of required funds, to
be provided by us or from operations, through the sale of additional securities,
through joint ventures or similar arrangements, or from other
sources;
(e)
The cost of participation by us as compared to the perceived tangible and
intangible values and potentials;
(f)
The extent to which the business opportunity can be
advanced;
(g)
The accessibility of required management expertise, personnel, raw
materials, services, professional assistance and other required items;
and
(h)
Other relevant factors.
In
applying the foregoing criteria, no one of which is controlling, our management
has and will continue, to the extent the Pending Merger is not consummated for
any reason and we resume our business objectives of identifying a target company
with which to combine, to attempt to analyze all factors and circumstances and
make a determination based upon reasonable investigative measures and available
data. Potentially available business opportunities may occur in many
different industries, and at various stages of development, all of which will
make the task of comparative investigation and analysis of such business
opportunities extremely difficult and complex. Due to our limited
capital available for investigation, if the Pending Merger is not consummated
for any reason and we resume our business objectives of identifying a target
company with which to combine, we may not discover or adequately evaluate
adverse facts about the target company with which we pursue a
combination. Further, it is highly likely that, within a very short
period of time following any cessation by Bixby of its contractual obligations
to meet certain of our ongoing expenses, we will find ourselves without
sufficient capital resources to continue meeting our public reporting and other
obligations the continued maintenance in good standing of which are deemed vital
to our ability to interest a target company and, ultimately, to effect a
business combination.
Form
of Business Combination
To the
extent that the Pending Merger is not consummated for any reason and we resume
our business objectives of identifying a target company with which to combine,
the manner in which we may participate in any given opportunity will depend upon
the nature of the opportunity, the respective needs and desires of us and the
promoters of the opportunity, and the negotiating strength we have relative to
the other parties involved.
To the
extent that the Pending Merger is not consummated for any reason and we resume
our business objectives of identifying a target company with which to combine,
it is likely that we will participate in a business opportunity through the
issuance of our common stock or other securities. Although the terms
of any such transaction cannot be predicted, it should be noted that, in certain
circumstances, one of the primary factors for determining whether or not an
acquisition is a so-called “tax free” reorganization under Section 368(a)(1) of
the Internal Revenue Code of 1986, as amended (the “Code”) is whether the owners
of the acquired business own 80% or more of the voting stock of the surviving
entity. If a transaction were structured to take advantage of these
provisions rather than other “tax free” provisions provided under the Code,
which is likely but by no means assured, all prior stockholders would in such
circumstances retain 20% or less of the total issued and outstanding
shares. Depending upon the relative negotiating strength of the
parties, prior stockholders may, in fact, retain substantially less than 20% of
the total issued and outstanding shares of the surviving entity. This
could result in substantial dilution to the equity of those who were our
stockholders prior to such reorganization.
F-6
Our
present stockholders will likely not have control of a majority of our voting
shares following a reorganization transaction, including the Pending
Merger. As part of such a transaction, our sole director, or all or a
majority of our directors if we then have more than one, may resign and new
directors may be appointed without any vote by our stockholders. The
terms of the Pending Merger are such that our sole director currently, Michael
M. Membrado, will not be a director in the event that the transaction is
completed.
In the
case of an acquisition, the transaction may be accomplished upon the sole
determination of management without any vote or approval by our
stockholders. In the case of a statutory merger or consolidation
directly involving the Company, it will likely be necessary to call a
stockholders’ meeting and obtain the approval of the holders of a majority of
our outstanding shares. The necessity to obtain such stockholder
approval may result in delay and additional expense in the consummation of any
proposed transaction and will also give rise to certain appraisal rights to
dissenting stockholders. As is the case with the Pending Merger,
management is likely to seek to structure any such transaction so as not to
require stockholder approval, an objective often accomplished through the
establishment and use of a special-purpose acquisition subsidiary.
It is
anticipated that the investigation of specific business opportunities and the
negotiation, drafting and execution of relevant agreements, disclosure documents
and other instruments will require substantial management time and attention and
substantial cost for accountants, auditors, attorneys and others. If
a decision is made not to pursue or otherwise participate in a specific business
opportunity, the costs then previously incurred in the related investigation
would not be recoverable. Furthermore, even if an agreement is
reached for the participation in a specific business opportunity, including the
Pending Merger, the failure to consummate that transaction may result in our
loss of some or all of the related costs incurred.
We
presently have no employees apart from our executive management. Our
sole officer and director, Michael M. Membrado, is engaged in outside
professional pursuits and business activities, most notably a legal practice,
and devotes to our business only limited time beyond that for which his firm is
compensated in the form of legal fees. We expect no significant
changes in the number of our employees unless and until we consummate a business
combination, including, if applicable, the Pending Merger.
The Pending Merger
On March
27, 2009, we entered into a definitive Amended & Restated Agreement and Plan
of Merger (the “Merger Agreement”) with each of Bixby Energy Acquisition Corp.,
a wholly-owned special-purpose acquisition subsidiary of GCA (“Merger Sub”),
Bixby Energy Systems, Inc. (“Bixby”), and Robert A. Walker, the founder,
President, Chief Executive Officer and Chairman of the board of directors of
Bixby (“Mr. Walker”). The Merger Agreement amended and restated a
previous merger agreement entered into among the same parties as of May 7,
2008. Contemporaneously and in connection with the Merger Agreement,
Mr. Walker and GCA entered into an amended and restated voting agreement (the
“Voting Agreement”).
In
accordance with the terms of the Merger Agreement, and as a result of the
Pending Merger to the extent that it is completed:
|
·
|
Bixby
will become a wholly-owned subsidiary of
GCA;
|
|
·
|
the
officers and sole director of GCA prior to the effective time of the
Pending Merger will resign; and
|
F-7
|
·
|
by
virtue of the conversion or exchange of Bixby securities for GCA
securities, Bixby securityholders before the Pending Merger will own
between approximately 92% and 96% of the voting stock of GCA after closing
of the Pending Merger.
|
As soon
as practicable following any closing of the Pending Merger (i.e. following the change in
control of GCA contemplated by the Pending Merger):
|
·
|
the
board of directors of GCA will amend the bylaws of GCA to permit a board
of directors ranging between one and twelve
directors;
|
|
·
|
the
board of directors of GCA will appoint as directors those persons who were
directors of Bixby immediately prior to the closing of the Pending Merger;
and
|
|
·
|
the
board of directors of GCA will elect new officers of GCA who will be the
same persons who were officers of Bixby immediately prior to the closing
of the Pending merger.
|
Upon any
closing of the Pending Merger, Bixby’s assets and operations will become the
assets and operations of GCA.
Bixby is
an early-stage company focused on the development and commercial exploitation of
a gasification system that converts certain types of coal into a combination of
specialty carbon products including synthetic natural gas (“SNG”), metallurgical
coke (“met coke” or “coke”), activated carbon (“AC”), and, pending further
development in terms of commercial scalability, a second-stage liquefaction
technology system capable of converting the AC into a light, sweet crude
synfuel, products which, taken together, are expected to offer a significantly
higher commercial value than coal. It has patent applications pending
on certain of the design features of this
system.
Based on
information received by us from Bixby representatives, Bixby is currently in the
process of delivering and installing its initial carbon conversion system test
units. The first of these test units, for which Bixby received a
$900,000 deposit against a $2 million total sale price during the first half of
2010, was shipped to China and, as of the date hereof, is being held temporarily
in storage pending acceptance of delivery by the customer, a state-owned central
heating facility located in Xilinhot, Inner Mongolia, China, and
installation. The $1.1 million balance becomes payable to Bixby upon
satisfactory completion of a thirty day operational period following delivery
and installation of the test unit. The sale originated through a
joint venture partner with which Bixby established a relationship over the past
approximately 23 months for purposes of marketing its technology throughout
China. Since commencing production on this unit, and also based on
information received by us from Bixby representatives, Bixby has received orders
and deposits for four additional test units from three other China-based
customer/licensees, in each case also through Bixby’s China joint venture
partner, and in each case on the same payment terms as the order for the initial
test unit. The second test unit is currently being readied for
shipment to a customer in Changzhi, Shanxi, China. Although Bixby has
generated only $4.5 million in revenue to date from operations utilizing this
carbon conversion technology (against orders totaling $10 million), Bixby
management believes that it is positioned to become a significant and
economically efficient producer and seller over time of these carbon conversion
system units, as well, potentially, as each of SNG, coke, and AC.
Although
not currently a component of the carbon conversion systems that it recently
began marketing, Bixby, according to information received by us from its
representatives, is in the process of scaling up a liquefaction technology that
it has developed which is expected to be made available as a back-end add-on
assembly to the mainframe carbon conversion system. Once fully
commercialized, this technology will enable users of the gasification system to
convert the coke that the system produces to a light sweet crude liquid synfuel
at a market-competitive cost. Although there can be no assurance, we
have been told that Bixby management believes that this technology will be ready
for market within the next several years.
F-8
Bixby’s
definitive business model for the future is currently in the research and
development stages and, as such, undetermined. While there is a
possibility that Bixby will determine to focus exclusively on the exploitation
of its technology through a model that contemplates Bixby’s involvement and risk
solely to the extent of those products directly generated through its technology
(i.e. SNG, met coke,
AC, and, eventually, crude oil), it is also considering involvement in
enterprises which involve products that are derived from certain of those
products, including coal-based gas-fired electric power plants. In
any case, and although there can be no assurance, Bixby expects to build its
business principally on the basis of single or multi-plant projects pursued in
accordance with any one of three different types of project models:
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Independent
Bixby projects;
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Strategic
joint venture projects; and
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Pure
sale/licensing projects.
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Bixby was
founded in July of 2001. It has never been
profitable. Although Bixby generated material revenues in certain
prior years since its inception in 2001 (none of which led, or even came close
to leading, to profitability during corresponding fiscal periods), such revenues
were exclusively generated from two business units neither of which remains a
focus of Bixby’s business plan. One of these business units had
been manufacturing and selling corn and wood-pellet burning home-heating
stoves (and related accessories) but, following an industry-wide slowdown
and resulting inventory glut, has been in a production halt and inventory
liquidation process for over two years. The other business
unit is a water-softener salts regional sales and distribution operation in
Minnesota and certain of the surrounding states which Bixby acquired in 2004 as
a strategic component of its then business plan which it has since sold, and
which is no longer part of Bixby’s operations.
The
obligations of the parties to consummate the Pending Merger are subject to the
satisfaction on or before the closing date of the Pending Merger of the
following conditions, among others:
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the
Pending Merger and the Merger Agreement having been approved by the Bixby
stockholders in accordance with the Delaware General Corporation Law and
Bixby’s certificate of incorporation and
bylaws;
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the
shares of GCA common stock and other securities issuable as part of the
Pending Merger having been duly
authorized; and
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a
combination S-4 registration statement covering the securities to be
issued in the Pending Merger and joint merger proxy statement (the “S-4
Registration/Merger Proxy Statement”) having become effective under the
Securities Act, delivered to all required recipients, and having not
become the subject of any stop order or proceeding seeking a stop
order.
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In
addition, the obligations of GCA and Merger Sub to consummate the Pending Merger are subject to satisfaction (or waiver by
GCA in its sole discretion) on or prior to the closing date of the following
conditions:
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Mr.
Walker having delivered an executed voting
agreement;
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In general, each of the representations and
warranties of Bixby and Mr. Walker set forth in the Merger Agreement being
true and correct as of the closing
date;
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Bixby
having obtained the requisite approval of its stockholders to the amendment of it’s certificate of
incorporation to revise the terms of it’s Series A convertible preferred
stock to provide that the Series A convertible preferred stock will
convert into GCA common stock on an as-converted basis in the Pending
Merger in accordance with the Delaware General Corporation Law and its
certificate of incorporation and bylaws;
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Bixby having entered into exchange agreements with
a number of the holders of Bixby convertible debt securities satisfactory
to GCA in its exclusive discretion, and performance by the holders of
their obligations under such exchange agreements having been
satisfied;
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F-9
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Bixby having entered into exchange agreements with
a number of the holders of Bixby common stock purchase warrants
satisfactory to GCA in its exclusive discretion, and performance by the
holders of their obligations under such exchange agreements having been
satisfied;
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Bixby having entered into exchange agreements with
a number of the holders of Bixby common stock purchase warrants
satisfactory to GCA in its exclusive discretion, and performance by the
holders of their obligations under such exchange agreements having been
satisfied; and
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GCA,
at the expense of Bixby, having procured directors and officers liability
insurance coverage in an aggregate amount, and from a carrier, satisfactory to
GCA.
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In
addition, the obligation of Bixby to consummate the Pending Merger is subject to
satisfaction (or waiver by Bixby in its sole discretion) on or prior to the
closing date of the following conditions:
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In
general, each of the representations and warranties of GCA set forth in
the Merger Agreement being true and correct as of the closing date as if
made at and as of the closing date;
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the
holders of no more than twenty percent (20%) of the Bixby shares eligible
for appraisal rights under the Delaware General Corporation Law having
taken the steps necessary steps to perfect their appraisal rights as
determined immediately prior to the effective time of the Pending
Merger;
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Bixby
having received resignations of each of the officers of GCA, effective, in
each case, as of the effective time of the Pending Merger;
and
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GCA having duly authorized and filed the
amendments to its certificate of incorporation relating to a required
7-for-10 reverse stock-split and an increase in its authorized common
stock to 200 million shares, and GCA having outstanding no securities
other than 3.5 million shares of its common
stock.
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The
Merger Agreement may be terminated and the Pending Merger and the related
transactions may be abandoned at any time prior to the effective time of the
Pending Merger, even though requisite approval has been obtained, as
follows:
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by
mutual written consent duly authorized by the boards of directors of each
of GCA, Merger Sub and Bixby;
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by
GCA:
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to
the extent that the effective time of the Pending Merger shall not have
occurred on or before December 31,
2009;
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if
GCA reasonably concludes that material information regarding Bixby and/or
its subsidiaries that it determines to include in the S-4
Registration/Merger Proxy Statement has been unreasonably withheld by
Bixby and/or its subsidiaries;
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if
Bixby unreasonably withholds its approval as to the accuracy and
completeness of the S-4 Registration/Merger Proxy
Statement;
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if
Bixby’s independent auditors resign due to a disagreement with management
of Bixby or any of its officers and/or
directors;
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F-10
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upon
a material breach of any representation, warranty, covenant or agreement
on the part of Bixby set forth in the Merger
Agreement;
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if
any representation or warranty of Bixby shall have become materially
untrue unless (i) the breach is curable by Bixby through the exercise of
its best efforts and for so long as Bixby continues to exercise such best
efforts, and (ii) the breach is the direct or indirect result of
obligations arising under or are otherwise reasonably contemplated by any
other provision of the Merger Agreement;
or
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if
any condition to Bixby’s obligation to complete the Pending Merger is not
met;
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by
Bixby:
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if
Bixby’s stockholders fail to approve the Pending Merger and the Merger
Agreement within a reasonable period following good faith compliance by
Bixby and Mr. Walker with their respective obligations under the Merger
Agreement;
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upon
a material breach of any representation, warranty, covenant or agreement
on the part of GCA set forth in the Merger Agreement, or if any
representation or warranty of GCA shall have become materially untrue
unless (i) the breach is curable by GCA through the exercise of its best
efforts and for so long as GCA continues to exercise such best efforts,
and (ii) the breach is the direct or indirect result of obligations
arising under or are otherwise reasonably contemplated by any other
provision of the Merger Agreement;
or
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if
any condition to GCA’s obligation to complete the Pending Merger is not
met.
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The
foregoing description of the Merger Agreement is incomplete and is qualified in
its entirety by the Merger Agreement itself, a copy of which is included as
Exhibit 10.1 to the Current Report on Form 8-K filed by us on April 2,
2009.
Going
Concern
The
Company’s financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company is in the
development stage and has not earned any revenues from operations to date. These
conditions raise substantial doubt about its ability to continue as a going
concern.
The
Company has not generated revenue since its inception on August 14, 2006 and has
incurred net losses of $77,358 since inception. As a result, its current
operations are an inadequate source of cash to fund future operations. The
report of the Company’s independent registered public accounting firm in
relation to the Company’s financial statements for the year ended May 31, 2010
contains an explanatory paragraph regarding the Company’s ability to continue as
a going concern based upon its net losses and cash used in operations. The
Company’s ability to continue as a going concern is dependent upon its ability
to obtain the necessary financing to meet its obligations and repay its
liabilities when they become due and to generate profitable operations in the
future. The Company plans to continue to provide for its capital requirements
through the sale of equity securities and debt, however, it has no firm
commitments from any third party to provide this financing and it cannot provide
any assurance that it will be successful in raising working capital as needed.
There are no assurances that it will have sufficient funds to execute its
business plan, pay its obligations as they become due or generate positive
operating results.
Basis
of Presentation and Consolidation
The
accompanying consolidated financial statements present the results of operations
of its wholly-owned subsidiary for the three and six month periods ending
November 30, 2010 and 2009. All material inter-company accounts and transactions
between the Company and its subsidiary have been eliminated in
consolidation.
F-11
In the
opinion of management, the financial statements contain all material
adjustments, consisting only of normal recurring adjustments necessary to
present fairly the financial condition, results of operations, and cash flows of
the Company for the interim periods presented.
The
results for the period ended November 30, 2010 are not necessarily indicative of
the results of operations for the full year. These financial
statements and related footnotes should be read in conjunction with the
financial statements and footnotes thereto included in the Company’s Form 10-K
filed with the Securities and Exchange Commission for the period ended May 31,
2010.
Note
2 - Summary of Significant Accounting Policies
Cash
and Cash Equivalents
Cash and
cash equivalents consist primarily of cash in banks. The Company considers cash
equivalents to include all highly liquid investments with original maturities of
three months or less to be cash equivalents.
Development
Stage
The
Company’s primary purpose for the time being is to acquire an operating
business. The Company spends most of its time in assessing acquisition
targets.
Concentration
of Credit Risks
The
Company is subject to concentrations of credit risk primarily from other
receivable.
At
November 30, 2010 and May 31, 2010, the Company's other receivable is entirely
due from an acquisition target, which is located in the United
States.
Other
Receivable and Reimbursements
Other
receivable consists of administrative expenses incurred by the Company and
reimbursable by an acquisition target. The matching reimbursement is recorded as
a contra-expense in the accompanying financial statements.
At
November 30, 2010 and May 31, 2010, the Company determined that provisions of
$28,358 and $-0- respectively, were appropriate.
Fair
Value of Financial Instruments
The
carrying value of cash and cash equivalents, accounts payable and accrued
expenses, and notes payable to a stockholder approximate their fair value due to
their short-term maturities.
Income
Taxes
Income
taxes are accounted for in accordance with ASC 740, Accounting for Income Taxes.
ASC requires the recognition of deferred tax assets and liabilities to reflect
the future tax consequences of events that have been recognized in the Company’s
financial statements or tax returns. Measurement of the deferred items is based
on enacted tax laws. In the event the future consequences of differences between
financial reporting bases and tax bases of the Company’s assets and liabilities
result in a deferred tax asset, ASC No. 740 requires an evaluation of the
probability of being able to realize the future benefits indicated by such
assets. A valuation allowance related to a deferred tax asset is recorded when
it is more likely than not that some or the entire deferred tax asset will not
be realized.
F-12
For
federal income tax purposes, substantially all expenses must be deferred until
the Company commences business and then they may be written off over a 60-month
period. These expenses will not be deducted for tax purposes and will represent
a deferred tax asset. The Company will provide a valuation allowance in the full
amount of the deferred tax asset since there is no assurance of future taxable
income. Tax deductible losses can be carried forward under current applicable
law for 20 years until utilized.
Use
of Estimates
The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Significant estimates made by management include, but are not
limited to, the amount of unbilled vendors’ payable for services performed
during the reporting period. Actual results may differ from these estimates and
assumptions.
Basic
and Diluted Earnings per Common Share
Basic
earnings per common share are calculated by dividing income available to
stockholders by the weighted-average number of common shares outstanding during
each period. Diluted earnings per share are computed using the weighted average
number of common shares outstanding plus the dilutive effects of outstanding
options and warrants to acquire common shares during the period. In loss
periods, dilutive common equivalent shares are excluded because the effect would
be anti-dilutive. The Company had not issued any dilutive common share
equivalents at November 30, 2010.
Accounts
Payable and Accrued Expenses
Accounts
payable and accrued expenses at November 30, 2010 consisted primarily of accrued
professional fees.
Related
Party Transactions
At
November 30, 2010, the Company owed $39,285 to a law firm for services
rendered. The law firm is related to the Company by means of common
ownership and management.
The
Company neither owns nor leases any real or personal property. Most office
services are provided without charge by our sole officer and director. Such
costs are immaterial to the financial statements and accordingly, have not been
reflected therein.
Our sole
officer and director is involved in other business activities and may in the
future become involved in other business pursuits when opportunities present
themselves. As a result of these other activities, such persons may face a
conflict in selecting between the Company and their other business interests.
The Company has not formulated a policy for the resolution of such
conflicts.
At
November 30, 2010 the Company had issued notes payable aggregating $32,100 to a
major stockholder. The notes bear interest at 4.75% per annum. The notes are
payable on or before the first day upon which the Company receives proceeds from
equity investments aggregating at least $250,000. Any overdue principal bears
interest at 15% per annum and is payable on demand. The accrued interest expense
related to these notes amounted to $5,424 at November 30, 2010.
Recent
Issued Accounting Pronouncements
In
October 2009, the FASB issued guidance for amendments to FASB Emerging Issues
Task Force on EITF Issue No. 09-1 “Accounting for Own-Share Lending
Arrangements in Contemplation of a Convertible Debt Issuance or Other
Financing” (Subtopic 470-20) “Subtopic.” This accounting standards update
establishes the accounting and reporting guidance for arrangements under which
own-share lending arrangements issued in contemplation of convertible debt
issuance. This Statement is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15,
2009. Earlier adoption is not permitted. Management
believes this Statement will have no impact on the financial statements of the
Company once adopted.
F-13
In
January 2010, the FASB issued guidance to amend the disclosure requirements
related to recurring and nonrecurring fair value measurements. The guidance
requires new disclosures on the transfers of assets and liabilities between
Level 1 (quoted prices in active market for identical assets or liabilities) and
Level 2 (significant other observable inputs) of the fair value measurement
hierarchy, including the reasons and the timing of the
transfers. Additionally, the guidance requires a roll forward of activities
on purchases, sales, issuance, and settlements of the assets and liabilities
measured using significant unobservable inputs (Level 3 fair value
measurements). The guidance is effective for us with the reporting period
beginning February 28, 2010, except for the disclosure on the roll forward
activities for Level 3 fair value measurements, which will become effective for
us with the reporting period beginning January 1, 2011. Other than requiring
additional disclosures, management does not expect that adoption of this new
guidance will have a material impact on the Company’s financial statements, if
any.
Management
does not believe any other recently issued, but not yet effective, accounting
standards, if currently adopted, could have a material effect on the
accompanying financial statements.
Note
3 - Stockholders’ Deficit
Common
Stock
The
Company is authorized to issue 100,000,000 shares of common stock. On August 14,
2006, the Company issued 5,000,000 shares of its common stock pursuant to a
private placement offering generating proceeds of $500.
Preferred
Stock
The
Company is authorized to issue 20,000,000 shares of preferred stock with such
designations, voting and other rights and preferences as may be determined from
time to time by the Board of Directors.
Note 4
- Subsequent Events
Throughout
the balance of 2009 and continuing for only a brief part of early 2010, our
focus had been predominantly on fulfilling our obligations under the Merger
Agreement in pursuit of the Pending Merger, including the preparation, filing
with the SEC, and amending as necessary and re-filing, of a related S-4
registration/merger proxy statement. During the first half of 2010,
Bixby began to make known to us its desire to terminate the Merger Agreement and
to abandon the Pending Merger. Within several days following delivery
by us to Bixby in early April, 2010 of an invoice reflecting an amount then
cumulatively owed by Bixby to us under the Merger Agreement, Bixby communicated
to us its determination that it was repudiating the Merger Agreement and a
dispute between us arose as a result (the “Bixby Dispute”).
Discussions
between Bixby and GCA surrounding the Bixby Dispute followed, including
potential terms upon which it might have been able to be resolved, and on July
1, 2010, a certain Contingent Settlement & Standstill Agreement was entered
into among us, Merger Sub, Bixby, Mr. Walker, and each of our two current
shareholders, Michael Membrado, our and Merger Sub’s current President, Chief
Executive Officer, Chief Financial Officer, Secretary, Treasurer and sole
Director (“Mr. Membrado”) and Jennifer Lee (“Ms. Lee”), which agreement (the
“Contingent Settlement Agreement”) could have potentially effected a change in
our control (and, indirectly, the control of Merger Sub) as well as a
termination of each of the Merger Agreement and the Voting
Agreement.
F-14
Under the
terms of the Contingent Settlement Agreement, each of Mr. Membrado and Ms. Lee
had conditionally agreed to sell all of the shares of GCA capital stock
currently held by each of them (2,500,000 shares of common stock, respectively)
to Bixby for a price of $0.10 per share (total $500,000), thereby causing GCA to
become a wholly-owned subsidiary of Bixby. Although a non-refundable
down-payment of $50,000 was paid to each of Mr. Membrado and Ms. Lee upon
execution of the Contingent Settlement Agreement (for which no shares were to be
transferred unless and until the transaction was completed, thereby effectively
rendering this part of the transaction a covered call option), the Contingent
Settlement Agreement provided that Bixby had until September 15, 2010 to deliver
the balance (or call option exercise price) of $400,000 and complete the
transaction, and that, in the meantime, GCA and Merger Sub were prohibited from
initiating or otherwise pursuing any legal proceedings under or in connection
with the Merger Agreement. Bixby did not satisfy, in whole or in
part, the required payment obligation by September 15, 2010, and, as such, no
sale or other conveyance of GCA common stock was effectuated, or will be
effectuated, pursuant to the Contingent Settlement Agreement, and there is no
longer a settlement agreement of any kind in place as between Bixby and GCA or
otherwise in connection with the Bixby Dispute.
In the
meantime, active pursuit of the Pending Merger has been suspended by us due to a
combination of non-payment by Bixby of their financial obligations to us under
the Merger Agreement, which are necessary for us to continue such pursuit, and
their unwillingness to cooperate with us more generally in continuing to work
towards a closing.
As a
separate part of the Contingent Settlement Agreement, Bixby was also required to
pay off the outstanding professional fee obligations for GCA that had arisen
under the Merger Agreement (and for which they were already contractually
obligated), both preexisting and going forward through completion of the
contemplated share purchase transaction if and when that were to have
occurred. In connection with this aspect of the Contingent Settlement
Agreement and/or its obligations arising under the Merger Agreement, as of
November 30, 2010, and after adjusting for doubtful accounts, we were not owed
any amount by Bixby.
At this
time, there remains a high degree of uncertainty as to whether:
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the
Bixby Dispute will be resolved in the near-term and whether any such
resolution might involve resumption of the Pending Merger and, if so, when
that might occur and when the Pending Merger might be consummated, if at
all; or
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the
Bixby Dispute will continue unresolved and potentially come to involve
litigation, and whether, should this occur, the Pending Merger will be
abandoned by us, either by agreement or otherwise, and we will be able to
identify and consummate an alternative business combination with a
different operating company at some future
date.
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In the
meantime, active pursuit of the Pending Merger has been suspended by us due to a
combination of non-payment by Bixby of their financial obligations to us under
the Merger Agreement, which is necessary for us to continue such pursuit, and
Bixby’s continued unwillingness to cooperate with us more generally in
continuing to work towards a closing. We continue as required under
the terms of the Merger Agreement, however, and for the time being, to remain
current in our reporting obligations under the Exchange Act.
At
November 30, 2010, we had $9,234 in cash. After an adjustment for
doubtful accounts, we had no other assets as of such date. With total
liabilities then of $83,592, at November 30, 2010, we were left with a working
capital deficit of $74,358.
In the
event that the Bixby Dispute is not resolved, and unless Bixby determines to
continue to fund our operating expenses in accordance with the terms of the
Merger Agreement notwithstanding any non-resolution of the Bixby Dispute, our
ability to continue to operate would be materially impaired, we could
potentially be confronted with substantial legal expenses associated with
pursuing our rights and remedies under the Merger Agreement, and we would become
entirely dependent, almost immediately, on our ability to obtain loans and/or
equity investments from shareholders or other investors to meet our operating
expenses and other financial obligations. At this time, however, we
do not have commitments for any such financing, and there can be no assurance
that we would be able to obtain any such financing if necessary on terms that
would be reasonably acceptable to us, or within a timeframe that would allow us
to remain financially viable and continue to operate while we evaluated and
pursued our going-forward options.
F-15
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
Forward
Looking Statement Notice
Certain
statements made in this quarterly report on Form 10-Q are “forward-looking
statements” (within the meaning of the Private Securities Litigation Reform Act
of 1995) regarding the plans and objectives of management for future
operations. Such statements involve known and unknown risks,
uncertainties and other factors that may cause actual results, performance or
achievements of GCA I Acquisition Corp. (“GCA”, “we”, “us”, “our” or the
“Registrant” or the “Company”) to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. The forward-looking statements included
herein are based on current expectations that involve numerous risks and
uncertainties. Our plans and objectives are based, in part, on
assumptions involving the continued expansion of
business. Assumptions relating to the foregoing involve judgments
with respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond our
control. Although we believe that our assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance the forward-looking
statements included in this annual report will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by us or any other person that our
objectives and plans will be achieved.
We were
incorporated in the State of Delaware on August 14, 2006. Since
inception, we have been engaged in organizational efforts, obtaining initial
financing, complying with reporting obligations under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and efforts to identify and
consummate a possible business combination with an existing operating
company. Until we are able to acquire or merge with an existing
operating company, our sole business purpose is to accomplish this
objective.
Recent Key Developments
On May 7,
2008, we entered into a definitive Agreement and Plan of Merger to engage in a
reverse subsidiary merger with a target operating company, Bixby Energy Systems,
Inc. (“Bixby”), among other parties, which agreement was superceded as of March
27, 2009 by a definitive Amended and Restated Agreement and Plan of Merger which
agreement remains in effect as of the date hereof (as amended and restated, the
“Merger Agreement”). Throughout the balance of 2009 and continuing
for only a brief part of early 2010, our focus had been predominantly on
fulfilling our obligations under the Merger Agreement in pursuit of the
contemplated merger transaction (the “Pending Merger”), including the
preparation, filing with the U.S. Securities and Exchange Commission (the
“SEC”), and amending as necessary and re-filing of a related S-4
registration/merger proxy statement. During the first half of 2010, a
dispute arose between us and Bixby based on Bixby’s announced determination that
it desired to terminate the Merger Agreement and abandon the Pending Merger (the
“Bixby Dispute”).
Following
certain discussions between Bixby and GCA surrounding the Bixby Dispute and
potential terms upon which it might have been able to be resolved, a certain
Contingent Settlement & Standstill Agreement was entered into on July 1,
2010 among the parties to the Merger Agreement as well as each of our two common
stockholders pursuant to which all of the outstanding shares of our common stock
could potentially be sold to and become wholly-owned by Bixby, and the Merger
Agreement would potentially be terminated, both on or before September 15, 2010,
in the event that certain payments were made by Bixby as of that date, including
a payment to us sufficient to enable us to satisfy all of our then-existing
material financial obligations (as more fully described hereinafter, the
“Contingent Settlement Agreement”). Although certain payments were
made by Bixby under the Contingent Settlement Agreement, the time within which
Bixby had been given under such agreement to satisfy certain payment obligations
expired without such payments having been made, and, as such, no sale or other
conveyance of GCA common stock was effectuated, or will be effectuated, pursuant
thereto, and there is no longer a settlement agreement of any kind in place as
between Bixby and GCA or otherwise in connection with the Bixby
Dispute.
2
At this
time, there remains a high degree of uncertainty as to whether:
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the
Bixby Dispute will be resolved in the near-term and whether any such
resolution might involve resumption of the Pending Merger and, if so, when
that might occur and when the Pending Merger might be consummated, if at
all; or
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the
Bixby Dispute will continue unresolved and potentially come to involve
litigation, and whether, should this occur, the Pending Merger will be
abandoned by us, either by agreement or otherwise, and we will be able to
identify and consummate an alternative business combination with a
different operating company at some future
date.
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In the
meantime, active pursuit of the Pending Merger has been suspended by us due to a
combination of non-payment by Bixby of their financial obligations to us under
the Merger Agreement, which is necessary for us to continue such pursuit, and
Bixby’s continued unwillingness to cooperate with us more generally in
continuing to work towards a closing. We continue as required under
the terms of the Merger Agreement, however, and for the time being, to remain
current in our reporting obligations under the Exchange Act.
Transactions
of the type we have been pursuing are generally quite complicated, subject to
many material risks, and subject to many conditions that may or may not be
satisfied, and there can be no assurance, as a result, that we will be able to
complete one, either with Bixby or with a different target operating
company. If the Pending Merger or any other transaction is completed,
it is highly unlikely that this would occur for some significant period of time
from the date of this annual report. A copy of the Merger Agreement
is annexed as Exhibit 10.1 to the current report on Form 8-K filed by us on
April 2, 2009.
We
selected May 31 as our fiscal year end. We maintain our principal
executive offices at 115 East 57th Street,
11th
Floor, New York, NY 10022.
Our
Business Generally
Based on
our proposed business activities, we are what is known as a “blank check”
company. The SEC defines “blank check” companies as “any development
stage company that is issuing a penny stock, within the meaning of Section
3(a)(51) of the Exchange Act, and that has no specific business plan or purpose,
or has indicated that its business plan is to merge with an unidentified company
or companies.” Under SEC Rule 12b-2 under the Securities Act of 1933,
as amended (the “Securities Act”), we also qualify as a “shell company,” because
we have no or nominal assets and no or nominal operations. Many
states have enacted statutes, rules and regulations limiting the sale of
securities of “blank check” companies in their respective
jurisdictions. Our management does not intend to undertake any
efforts to cause a market to develop in our securities, either debt or equity,
unless and until we have successfully concluded a business
combination. We intend to comply with the periodic reporting
requirements of the Exchange Act for so long as we continue to be subject to
those requirements.
We were
organized as a vehicle to investigate and, if such investigation warrants,
acquire a target company or business seeking the perceived advantages of being a
publicly-held corporation. Our principal business objective for the
next 12 months and beyond such time will be to achieve long-term growth
potential through a combination with an operating business rather than immediate
short-term earnings. Given the Pending Merger, and notwithstanding
the Bixby Dispute, we have curtailed for the time being our efforts in seeking
out alternative target companies with which to combine. However, to
the extent that the Pending Merger is not consummated for any reason and we
resume our business objectives of identifying a target company with which to
combine, we will not restrict our potential candidate target companies to any
specific business, industry or geographic location and may, as a result, acquire
any type of business.
3
To date,
the analysis of new business opportunities has been undertaken by or under the
supervision of Michael M. Membrado, our sole officer and
director. Until such time as we entered into the Merger
Agreement, we had had unrestricted flexibility in seeking, analyzing and
participating in potential business opportunities, and, in the event that the
Pending Merger is not consummated for any reason and we resume our business
objectives of identifying a target company with which to combine, we expect to
enjoy the same unrestricted flexibility. In our efforts to analyze
potential acquisition targets, we had considered, and will continue to consider
to the extent that the Pending Merger is not consummated for any reason and we
resume our business objectives of identifying a target company with which to
combine, the following kinds of factors:
(a)
Potential for growth, indicated by new technology, anticipated market
expansion or new products;
(b)
Competitive position as compared to other firms of similar size and
experience within the industry segment as well as within the industry as a
whole;
(c)
Strength and diversity of management, either in place or scheduled for
recruitment;
(d)
Capital requirements and anticipated availability of required funds, to
be provided by us or from operations, through the sale of additional securities,
through joint ventures or similar arrangements, or from other
sources;
(e)
The cost of participation by us as compared to the perceived tangible and
intangible values and potentials;
(f)
The extent to which the business opportunity can be
advanced;
(g)
The accessibility of required management expertise, personnel, raw
materials, services, professional assistance and other required items;
and
(h)
Other relevant factors.
In
applying the foregoing criteria, no one of which is controlling, our management
has and will continue, to the extent the Pending Merger is not consummated for
any reason and we resume our business objectives of identifying a target company
with which to combine, to attempt to analyze all factors and circumstances and
make a determination based upon reasonable investigative measures and available
data. Potentially available business opportunities may occur in many
different industries, and at various stages of development, all of which will
make the task of comparative investigation and analysis of such business
opportunities extremely difficult and complex. Due to our limited
capital available for investigation, if the Pending Merger is not consummated
for any reason and we resume our business objectives of identifying a target
company with which to combine, we may not discover or adequately evaluate
adverse facts about the target company with which we pursue a
combination. Further, it is highly likely that, within a very short
period of time following any cessation by Bixby of its contractual obligations
to meet certain of our ongoing expenses, we will find ourselves without
sufficient capital resources to continue meeting our public reporting and other
obligations the continued maintenance in good standing of which are deemed vital
to our ability to interest a target company and, ultimately, to effect a
business combination.
Form
of Business Combination
To the
extent that the Pending Merger is not consummated for any reason and we resume
our business objectives of identifying a target company with which to combine,
the manner in which we may participate in any given opportunity will depend upon
the nature of the opportunity, the respective needs and desires of us and the
promoters of the opportunity, and the negotiating strength we have relative to
the other parties involved.
4
To the
extent that the Pending Merger is not consummated for any reason and we resume
our business objectives of identifying a target company with which to combine,
it is likely that we will participate in a business opportunity through the
issuance of our common stock or other securities. Although the terms
of any such transaction cannot be predicted, it should be noted that, in certain
circumstances, one of the primary factors for determining whether or not an
acquisition is a so-called “tax free” reorganization under Section 368(a)(1) of
the Internal Revenue Code of 1986, as amended (the “Code”) is whether the owners
of the acquired business own 80% or more of the voting stock of the surviving
entity. If a transaction were structured to take advantage of these
provisions rather than other “tax free” provisions provided under the Code,
which is likely but by no means assured, all prior stockholders would in such
circumstances retain 20% or less of the total issued and outstanding
shares. Depending upon the relative negotiating strength of the
parties, prior stockholders may, in fact, retain substantially less than 20% of
the total issued and outstanding shares of the surviving entity. This
could result in substantial dilution to the equity of those who were our
stockholders prior to such reorganization.
Our
present stockholders will likely not have control of a majority of our voting
shares following a reorganization transaction, including the Pending
Merger. As part of such a transaction, our sole director, or all or a
majority of our directors if we then have more than one, may resign and new
directors may be appointed without any vote by our stockholders. The
terms of the Pending Merger are such that our sole director currently, Michael
M. Membrado, will not be a director in the event that the transaction is
completed.
In the
case of an acquisition, the transaction may be accomplished upon the sole
determination of management without any vote or approval by our
stockholders. In the case of a statutory merger or consolidation
directly involving the Company, it will likely be necessary to call a
stockholders’ meeting and obtain the approval of the holders of a majority of
our outstanding shares. The necessity to obtain such stockholder
approval may result in delay and additional expense in the consummation of any
proposed transaction and will also give rise to certain appraisal rights to
dissenting stockholders. As is the case with the Pending Merger,
management is likely to seek to structure any such transaction so as not to
require stockholder approval, an objective often accomplished through the
establishment and use of a special-purpose acquisition subsidiary.
It is
anticipated that the investigation of specific business opportunities and the
negotiation, drafting and execution of relevant agreements, disclosure documents
and other instruments will require substantial management time and attention and
substantial cost for accountants, auditors, attorneys and others. If
a decision is made not to pursue or otherwise participate in a specific business
opportunity, the costs then previously incurred in the related investigation
would not be recoverable. Furthermore, even if an agreement is
reached for the participation in a specific business opportunity, including the
Pending Merger, the failure to consummate that transaction may result in our
loss of some or all of the related costs incurred.
We
presently have no employees apart from our executive management. Our
sole officer and director, Michael M. Membrado, is engaged in outside
professional pursuits and business activities, most notably a legal practice,
and devotes to our business only limited time beyond that for which his firm is
compensated in the form of legal fees. We expect no significant
changes in the number of our employees unless and until we consummate a business
combination, including, if applicable, the Pending Merger.
The Pending Merger
On March
27, 2009, we entered into a definitive Amended & Restated Agreement and Plan
of Merger (the “Merger Agreement”) with each of Bixby Energy Acquisition Corp.,
a wholly-owned special-purpose acquisition subsidiary of GCA (“Merger Sub”),
Bixby Energy Systems, Inc. (“Bixby”), and Robert A. Walker, the founder,
President, Chief Executive Officer and Chairman of the board of directors of
Bixby (“Mr. Walker”). The Merger Agreement amended and restated a
previous merger agreement entered into among the same parties as of May 7,
2008. Contemporaneously and in connection with the Merger Agreement,
Mr. Walker and GCA entered into an amended and restated voting agreement (the
“Voting Agreement”).
5
In
accordance with the terms of the Merger Agreement, and as a result of the
Pending Merger to the extent that it is completed:
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Bixby
will become a wholly-owned subsidiary of
GCA;
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the
officers and sole director of GCA prior to the effective time of the
Pending Merger will resign; and
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by
virtue of the conversion or exchange of Bixby securities for GCA
securities, Bixby securityholders before the Pending Merger will own
between approximately 92% and 96% of the voting stock of GCA after closing
of the Pending Merger.
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As soon
as practicable following any closing of the Pending Merger (i.e. following the change in
control of GCA contemplated by the Pending Merger):
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the
board of directors of GCA will amend the bylaws of GCA to permit a board
of directors ranging between one and twelve
directors;
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the
board of directors of GCA will appoint as directors those persons who were
directors of Bixby immediately prior to the closing of the Pending Merger;
and
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the
board of directors of GCA will elect new officers of GCA who will be the
same persons who were officers of Bixby immediately prior to the closing
of the Pending merger.
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Upon any
closing of the Pending Merger, Bixby’s assets and operations will become the
assets and operations of GCA.
Bixby is
an early-stage company focused on the development and commercial exploitation of
a gasification system that converts certain types of coal into a combination of
specialty carbon products including synthetic natural gas (“SNG”), metallurgical
coke (“met coke” or “coke”), activated carbon (“AC”), and, pending further
development in terms of commercial scalability, a second-stage liquefaction
technology system capable of converting the AC into a light, sweet crude
synfuel, products which, taken together, are expected to offer a significantly
higher commercial value than coal. It has patent applications pending
on certain of the design features of this
system.
Based on
information received by us from Bixby representatives, Bixby is currently in the
process of delivering and installing its initial carbon conversion system test
units. The first of these test units, for which Bixby received a
$900,000 deposit against a $2 million total sale price during the first half of
2010, was shipped to China and, as of the date hereof, is being held temporarily
in storage pending acceptance of delivery by the customer, a state-owned central
heating facility located in Xilinhot, Inner Mongolia, China, and
installation. The $1.1 million balance becomes payable to Bixby upon
satisfactory completion of a thirty day operational period following delivery
and installation of the test unit. The sale originated through a
joint venture partner with which Bixby established a relationship over the past
approximately 23 months for purposes of marketing its technology throughout
China. Since commencing production on this unit, and also based on
information received by us from Bixby representatives, Bixby has received orders
and deposits for four additional test units from three other China-based
customer/licensees, in each case also through Bixby’s China joint venture
partner, and in each case on the same payment terms as the order for the initial
test unit. The second test unit is currently being readied for
shipment to a customer in Changzhi, Shanxi, China. Although Bixby has
generated only $4.5 million in revenue to date from operations utilizing this
carbon conversion technology (against orders totaling $10 million), Bixby
management believes that it is positioned to become a significant and
economically efficient producer and seller over time of these carbon conversion
system units, as well, potentially, as each of SNG, coke, and AC.
Although
not currently a component of the carbon conversion systems that it recently
began marketing, Bixby, according to information received by us from its
representatives, is in the process of scaling up a liquefaction technology that
it has developed which is expected to be made available as a back-end add-on
assembly to the mainframe carbon conversion system. Once fully
commercialized, this technology will enable users of the gasification system to
convert the coke that the system produces to a light sweet crude liquid synfuel
at a market-competitive cost. Although there can be no assurance, we
have been told that Bixby management believes that this technology will be ready
for market within the next several years.
6
Bixby’s
definitive business model for the future is currently in the research and
development stages and, as such, undetermined. While there is a
possibility that Bixby will determine to focus exclusively on the exploitation
of its technology through a model that contemplates Bixby’s involvement and risk
solely to the extent of those products directly generated through its technology
(i.e. SNG, met coke,
AC, and, eventually, crude oil), it is also considering involvement in
enterprises which involve products that are derived from certain of those
products, including coal-based gas-fired electric power plants. In
any case, and although there can be no assurance, Bixby expects to build its
business principally on the basis of single or multi-plant projects pursued in
accordance with any one of three different types of project models:
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Independent
Bixby projects;
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Strategic
joint venture projects; and
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Pure
sale/licensing projects.
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Bixby was
founded in July of 2001. It has never been
profitable. Although Bixby generated material revenues in certain
prior years since its inception in 2001 (none of which led, or even came close
to leading, to profitability during corresponding fiscal periods), such revenues
were exclusively generated from two business units neither of which remains a
focus of Bixby’s business plan. One of these business units had
been manufacturing and selling corn and wood-pellet burning home-heating
stoves (and related accessories) but, following an industry-wide slowdown
and resulting inventory glut, has been in a production halt and inventory
liquidation process for over two years. The other business
unit is a water-softener salts regional sales and distribution operation in
Minnesota and certain of the surrounding states which Bixby acquired in 2004 as
a strategic component of its then business plan which it has since sold, and
which is no longer part of Bixby’s operations.
The
obligations of the parties to consummate the Pending Merger are subject to the
satisfaction on or before the closing date of the Pending Merger of the
following conditions, among others:
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the
Pending Merger and the Merger Agreement having been approved by the Bixby
stockholders in accordance with the Delaware General Corporation Law and
Bixby’s certificate of incorporation and
bylaws;
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the
shares of GCA common stock and other securities issuable as part of the
Pending Merger having been duly authorized;
and
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a
combination S-4 registration statement covering the securities to be
issued in the Pending Merger and joint merger proxy statement (the “S-4
Registration/Merger Proxy Statement”) having become effective under the
Securities Act, delivered to all required recipients, and having not
become the subject of any stop order or proceeding seeking a stop
order.
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In
addition, the obligations of GCA and Merger Sub to consummate the Pending Merger
are subject to satisfaction (or waiver by GCA in its sole discretion) on or
prior to the closing date of the following conditions:
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Mr.
Walker having delivered an executed voting
agreement;
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In
general, each of the representations and warranties of Bixby and Mr.
Walker set forth in the Merger Agreement being true and correct as of the
closing date;
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Bixby
having obtained the requisite approval of its stockholders to the
amendment of it’s certificate of incorporation to revise the terms of it’s
Series A convertible preferred stock to provide that the Series A
convertible preferred stock will convert into GCA common stock on an
as-converted basis in the Pending Merger in accordance with the Delaware
General Corporation Law and its certificate of incorporation and
bylaws;
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7
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Bixby
having entered into exchange agreements with a number of the holders of
Bixby convertible debt securities satisfactory to GCA in its exclusive
discretion, and performance by the holders of their obligations under such
exchange agreements having been
satisfied;
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Bixby
having entered into exchange agreements with a number of the holders of
Bixby common stock purchase warrants satisfactory to GCA in its exclusive
discretion, and performance by the holders of their obligations under such
exchange agreements having been
satisfied;
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Bixby
having entered into exchange agreements with a number of the holders of
Bixby common stock purchase warrants satisfactory to GCA in its exclusive
discretion, and performance by the holders of their obligations under such
exchange agreements having been satisfied;
and
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GCA,
at the expense of Bixby, having procured directors and officers liability
insurance coverage in an aggregate amount, and from a carrier,
satisfactory to GCA.
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In
addition, the obligation of Bixby to consummate the Pending Merger is subject to
satisfaction (or waiver by Bixby in its sole discretion) on or prior to the
closing date of the following conditions:
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In
general, each of the representations and warranties of GCA set forth in
the Merger Agreement being true and correct as of the closing date as if
made at and as of the closing date;
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the
holders of no more than twenty percent (20%) of the Bixby shares eligible
for appraisal rights under the Delaware General Corporation Law having
taken the steps necessary steps to perfect their appraisal rights as
determined immediately prior to the effective time of the Pending
Merger;
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Bixby
having received resignations of each of the officers of GCA, effective, in
each case, as of the effective time of the Pending Merger;
and
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GCA
having duly authorized and filed the amendments to its certificate of
incorporation relating to a required 7-for-10 reverse stock-split and an
increase in its authorized common stock to 200 million shares, and GCA
having outstanding no securities other than 3.5 million shares of its
common stock.
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The
Merger Agreement may be terminated and the Pending Merger and the related
transactions may be abandoned at any time prior to the effective time of the
Pending Merger, even though requisite approval has been obtained, as
follows:
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by
mutual written consent duly authorized by the boards of directors of each
of GCA, Merger Sub and Bixby;
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by
GCA:
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to
the extent that the effective time of the Pending Merger shall not have
occurred on or before December 31,
2009;
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if
GCA reasonably concludes that material information regarding Bixby and/or
its subsidiaries that it determines to include in the S-4
Registration/Merger Proxy Statement has been unreasonably withheld by
Bixby and/or its subsidiaries;
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if
Bixby unreasonably withholds its approval as to the accuracy and
completeness of the S-4 Registration/Merger Proxy
Statement;
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8
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if
Bixby’s independent auditors resign due to a disagreement with management
of Bixby or any of its officers and/or
directors;
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upon
a material breach of any representation, warranty, covenant or agreement
on the part of Bixby set forth in the Merger
Agreement;
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if
any representation or warranty of Bixby shall have become materially
untrue unless (i) the breach is curable by Bixby through the exercise of
its best efforts and for so long as Bixby continues to exercise such best
efforts, and (ii) the breach is the direct or indirect result of
obligations arising under or are otherwise reasonably contemplated by any
other provision of the Merger Agreement;
or
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if
any condition to Bixby’s obligation to complete the Pending Merger is not
met;
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by
Bixby:
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if
Bixby’s stockholders fail to approve the Pending Merger and the Merger
Agreement within a reasonable period following good faith compliance by
Bixby and Mr. Walker with their respective obligations under the Merger
Agreement;
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upon
a material breach of any representation, warranty, covenant or agreement
on the part of GCA set forth in the Merger Agreement, or if any
representation or warranty of GCA shall have become materially untrue
unless (i) the breach is curable by GCA through the exercise of its best
efforts and for so long as GCA continues to exercise such best efforts,
and (ii) the breach is the direct or indirect result of obligations
arising under or are otherwise reasonably contemplated by any other
provision of the Merger Agreement;
or
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if
any condition to GCA’s obligation to complete the Pending Merger is not
met.
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The
foregoing description of the Merger Agreement is incomplete and is qualified in
its entirety by the Merger Agreement itself, a copy of which is included as
Exhibit 10.1 to the Current Report on Form 8-K filed by us on April 2,
2009.
The Bixby Dispute
Throughout
the balance of 2009 and continuing for only a brief part of early 2010, our
focus had been predominantly on fulfilling our obligations under the Merger
Agreement in pursuit of the Pending Merger, including the preparation, filing
with the SEC, and amending as necessary and re-filing, of a related S-4
registration/merger proxy statement. During the first half of 2010,
Bixby began to make known to us its desire to terminate the Merger Agreement and
to abandon the Pending Merger. Within several days following delivery
by us to Bixby in early April, 2010 of an invoice reflecting an amount then
cumulatively owed by Bixby to us under the Merger Agreement, Bixby communicated
to us its determination that it was repudiating the Merger Agreement and a
dispute between us arose as a result (the “Bixby Dispute”).
Discussions
between Bixby and GCA surrounding the Bixby Dispute followed, including
potential terms upon which it might have been able to be resolved, and on July
1, 2010, a certain Contingent Settlement & Standstill Agreement was entered
into among us, Merger Sub, Bixby, Mr. Walker, and each of our two current
shareholders, Michael Membrado, our and Merger Sub’s current President, Chief
Executive Officer, Chief Financial Officer, Secretary, Treasurer and sole
Director (“Mr. Membrado”) and Jennifer Lee (“Ms. Lee”), which agreement (the
“Contingent Settlement Agreement”) could have potentially effected a change in
our control (and, indirectly, the control of Merger Sub) as well as a
termination of each of the Merger Agreement and the Voting
Agreement.
9
Under the
terms of the Contingent Settlement Agreement, each of Mr. Membrado and Ms. Lee
had conditionally agreed to sell all of the shares of GCA capital stock
currently held by each of them (2,500,000 shares of common stock, respectively)
to Bixby for a price of $0.10 per share (total $500,000), thereby causing GCA to
become a wholly-owned subsidiary of Bixby. Although a non-refundable
down-payment of $50,000 was paid to each of Mr. Membrado and Ms. Lee upon
execution of the Contingent Settlement Agreement (for which no shares were to be
transferred unless and until the transaction was completed, thereby effectively
rendering this part of the transaction a covered call option), the Contingent
Settlement Agreement provided that Bixby had until September 15, 2010 to deliver
the balance (or call option exercise price) of $400,000 and complete the
transaction, and that, in the meantime, GCA and Merger Sub were prohibited from
initiating or otherwise pursuing any legal proceedings under or in connection
with the Merger Agreement. Bixby did not satisfy, in whole or in
part, the required payment obligation by September 15, 2010, and, as such, no
sale or other conveyance of GCA common stock was effectuated, or will be
effectuated, pursuant to the Contingent Settlement Agreement, and there is no
longer a settlement agreement of any kind in place as between Bixby and GCA or
otherwise in connection with the Bixby Dispute.
In the
meantime, active pursuit of the Pending Merger has been suspended by us due to a
combination of non-payment by Bixby of their financial obligations to us under
the Merger Agreement, which are necessary for us to continue such pursuit, and
their unwillingness to cooperate with us more generally in continuing to work
towards a closing.
As a
separate part of the Contingent Settlement Agreement, Bixby was also required to
pay off the outstanding professional fee obligations for GCA that had arisen
under the Merger Agreement (and for which they were already contractually
obligated), both preexisting and going forward through completion of the
contemplated share purchase transaction if and when that were to have
occurred. In connection with this aspect of the Contingent Settlement
Agreement and/or its obligations arising under the Merger Agreement, as of
November 30, 2010, and after adjusting for doubtful accounts, we were not owed
any amount by Bixby.
At this
time, there remains a high degree of uncertainty as to whether:
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the
Bixby Dispute will be resolved in the near-term and whether any such
resolution might involve resumption of the Pending Merger and, if so, when
that might occur and when the Pending Merger might be consummated, if at
all; or
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the
Bixby Dispute will continue unresolved and potentially come to involve
litigation, and whether, should this occur, the Pending Merger will be
abandoned by us, either by agreement or otherwise, and we will be able to
identify and consummate an alternative business combination with a
different operating company at some future
date.
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In the
meantime, we continue as required under the terms of the Merger Agreement,
however, and for the time being, to remain current in our reporting obligations
under the Exchange Act.
At
November 30, 2010, we had $9,234 in cash. After an adjustment for
doubtful accounts, we had no other assets as of such date. With total
liabilities then of $83,592, at November 30, 2010, we were left with a working
capital deficit of $74,358.
In the
event that the Bixby Dispute is not resolved, and unless Bixby determines to
continue to fund our operating expenses in accordance with the terms of the
Merger Agreement notwithstanding any non-resolution of the Bixby Dispute, our
ability to continue to operate would be materially impaired, we could
potentially be confronted with substantial legal expenses associated with
pursuing our rights and remedies under the Merger Agreement, and we would become
entirely dependent, almost immediately, on our ability to obtain loans and/or
equity investments from shareholders or other investors to meet our operating
expenses and other financial obligations. At this time, however, we
do not have commitments for any such financing, and there can be no assurance
that we would be able to obtain any such financing if necessary on terms that
would be reasonably acceptable to us, or within a timeframe that would allow us
to remain financially viable and continue to operate while we evaluated and
pursued our going-forward options.
10
Plan
of Operation
We have
not realized any revenues from operations since August 14, 2006 (inception), and
our plan of operation for the next twelve months shall be to continue our
efforts to locate suitable acquisition candidates. We can provide no
assurance that we can continue to satisfy our cash requirements for at least the
next twelve months. It is not anticipated at present that we will
experience any change in our current number of employees until such time as we
may consummate a business combination.
Comparison
of Fiscal Periods Ended November 30, 2010 and November 30, 2009
Operational
Expenses
Total net
operating expenses were $71,934 for the fiscal period from August 14, 2006
(inception) through November 30, 2010, after adjusting for $755,805 in operating
expenses reimbursed to us by Bixby (see discussion in Liquidity and Capital
Resources below). Total net operating expenses were $36,061
for the three month period ended November 30, 2010, after adjusting for $30,405
in net Bixby reimbursements (see discussion in Liquidity and Capital
Resources below). Comparatively, total net operating expenses
after adjusting for net reimbursements by Bixby for the three month period ended
November 30, 2009 were $103,321. In each of these periods, these
expenses constituted professional and related fees. The decrease in
2010 over the comparable period in 2009 was principally attributable to the
sharp drop-off in legal fees associated with initiatives to cause the
registration statement portion of the S-4 Registration/Merger Proxy Statement to
be declared effective from and since the Bixby Dispute arose.
We
incurred a net loss of $77,358 for the fiscal period from August 14, 2006
(inception) through November 30, 2010. For the three and six month
periods ended November 30, 2010, we incurred net losses of $36,442 and $26,040,
respectively. This compared to net losses of $103,702 and $106,147
for the corresponding periods ended November 30, 2009. We believe
that these circumstances may hinder our ability to continue as a going concern
(see Footnote 1 to the Consolidated Financial Statements included
herewith).
Liquidity
and Capital Resources
The
following is a summary of the Company's cash flows provided by (used in)
operating, investing, and financing activities:
Cumulative Period From
|
||||||||
Six Months Ended
|
August
14, 2006 (Inception) to
|
|||||||
November 30, 2010
|
November 30, 2010
|
|||||||
Net
cash (used) in operating activities
|
$ | 6,731 | $ | 25,866 | ||||
Net
cash (used) in investing activities
|
$ | 0 | $ | 0 | ||||
Net
cash provided by financing activities
|
$ | 2,500 | $ | 35,100 | ||||
Net
increase (decrease) in cash and cash equivalents
|
$ | 9,231 | $ | 9,234 |
11
Due to
the fact that we have had no operations to date from which we derive any
revenues, prior to May 7, 2008 and extending back to August 14, 2006
(inception), we had been dependent on loans from existing stockholders’ to fund
our working capital needs. Prior to May 7, 2008, we had borrowed a
total of $32,100 from a single shareholder. Although, to date, we have generated
no revenues at all from operations, and we do not expect to generate any
revenues from operations absent a merger or other combination with an operating
company, as part of the Pending Merger and pursuant to the terms of the Merger
Agreement, Bixby agreed to pay, from and after May 7, 2008, our reasonable
legal, accounting, independent auditing, and EDGARization/printing service fees
and expenses in connection with (a) the preparation and filing of any and all
required reports to be filed under the Exchange Act from and after May 7, 2008
through the earlier of (i) four business days following the consummation of the
Pending Merger, or (ii) the time at which the Merger Agreement shall have been
terminated, if at all, in accordance with its terms, and (b) the Pending Merger
and the preparation, filing and dissemination of the S-4 Registration/Merger
Proxy Statement and all related federal and state securities law compliance
associated with the Pending Merger. At November 30, 2010, and after
adjusting for doubtful accounts, there was no balance owed by Bixby to
GCA.
Beginning
mid-February 2010, GCA had been receiving reports from certain sources close to
Bixby management that Bixby and Mr. Walker had recently determined to abandon
their pursuit of the Pending Merger, including the meeting of their respective
obligations under the Merger Agreement. Although GCA was informed
through its sources in the weeks that followed that there was some
reconsideration on the part of Bixby and Mr. Walker being given to this matter,
GCA was further informed that Bixby and Mr. Walker seemed to be determined to
repudiate the Merger Agreement.
In
mid-March 2010, Bixby informed us directly of its and Mr. Walker’s then-current
intention to repudiate the Merger Agreement and discontinue to meet their
respective obligations thereunder in relation to the S-4 Registration/Merger
Proxy Statement as well as the pursuit more generally of the Pending
Merger. On April 5, 2010, GCA directed a formal written
correspondence to Mr. Walker and the Bixby board of directors informing them
that GCA had been made aware of Bixby’s anticipatory repudiation of the Merger
Agreement and seeking from Bixby formal assurances of its intention to honor the
Merger Agreement unless and until such time as a potential settlement in
relation to this matter could be reached. To date, GCA has not
received any response.
As of the
date of this quarterly report on Form 10-Q, there is a great deal of uncertainty
as to whether Bixby and Mr. Walker will remain intent on repudiating the Merger
Agreement, whether litigation between GCA, on the one hand, and Bixby and Mr.
Walker, on the other, will ensue, whether a potential settlement of some kind
will be reached in relation to the matter, or what the terms of any such
settlement might be if that should occur. Despite our voluntary
forbearance to date in declaring a default under the Merger Agreement based not
only on the recent repudiation of that agreement but also many other material
breaches on the part of Bixby and/or Mr. Walker thereunder extending back for
some time now, we have not waived any of our rights.
As of
November 30, 2010, we had total liabilities, consisting of accounts and notes
payable, equaling $83,592, and our only asset after adjusting for doubtful
accounts was $9,234 in cash. With reimbursements from Bixby having
been the source of the overwhelming majority of our operating capital for some
time now, and the pending Bixby Dispute having rendered the nature of our going
forward relationship with Bixby unclear for the time being and potentially
adversarial, there is a high degree of uncertainty as to our ability to meet our
current and going-forward obligations. Unless we are able to raise
capital from our current stockholders or one or more third parties, either
through loans or the sale of equity or debt securities, for which there can be
no assurance, any refusal or other failure on the part of Bixby to promptly pay
our expenses in accordance with the terms of the Merger Agreement going forward
would leave us without adequate financial resources to continue to engage the
services of professionals and other vendors that will be necessary for us to
continue to meet our reporting obligations under the Exchange
Act. Because there is no commitment regarding any such financing in
the event of such a contingency, there can be no assurance that such financing
will be available to us, either on terms favorable to us or at all.
In the
event that Bixby determines for whatever reason to resume meeting its
obligations under the Merger Agreement and, more generally, to pursue the
Pending Merger, and given that the expenses associated with the Pending merger
are the only material expenses that we would reasonably expect to incur under
such circumstances until such time as the Pending Merger is consummated, and
assuming this obligation is consistently honored by Bixby, we believe that that
the overwhelming majority of our working capital needs would be able to be met
through this arrangement until the Pending Merger is consummated, to the extent
that this at some point occurs. If the Merger Agreement were to be
terminated for any reason thereafter, or Bixby were to fail to honor its
obligations under the terms of the Merger Agreement either on a timely basis or
at all, and, in any event, if there were to be a deficiency in our working
capital needs beyond those amounts which Bixby is obligated to pay, it is
management’s belief that it would become necessary to fund our working capital
needs once again through loans from stockholders, or possibly from the sale of
equity or debt securities to unrelated parties. Because there is no
commitment regarding any such financing in the event of such a contingency,
there can be no assurance that such financing will be available to us at or
about the time it may be required, either on terms favorable to us or at
all.
12
At
November 30, 2010, we had cash of $9,234 and a working capital deficit of
$(74,358). This compares to cash of $3 and a working capital deficit
of $(50,818) at May 31, 2010. At November 30, 2010, after adjusting
for doubtful accounts, our only assets consisted of the $9,234 in
cash.
Results
of Operations
The
Company has not conducted any active operations since inception, except for its
efforts to locate suitable acquisition candidates and to negotiate the Pending
Merger. No revenue from operations has been generated by the Company
since August 14, 2006 (inception) to date. It is highly unlikely the
Company will have any revenues from operations unless it is able to effect an
acquisition, or merger with an operating company, a result for which there can
be no assurance. In this regard, any revenue we derive from Bixby’s
obligation to pay certain of our operating expenses as described under Liquidity and Capital
Resources above is not considered revenue from operations.
Since
August 14, 2006 (inception), selling, general and administrative expenses have
been primarily comprised of professional and related fees associated with the
Company registering to become publicly-traded, maintaining its internal controls
and reporting obligations under the Exchange Act, and pursuing the Pending
Merger. For this period, such net expenses (after adjusting for net
reimbursements from Bixby of $755,805) amounted to $71,934. For the
three month period ending November 30, 2010, such net expenses (after adjusting
for net reimbursements from Bixby of $30,405) amounted to
$36,061. This compares to $103,321 in such net expenses (after
adjusting for net reimbursements from Bixby of $46,390) for the three month
period ended November 30, 2009.
Since
August 14, 2006 (inception), and through November 30, 2010, interest expense has
been exclusively comprised of notes payable to stockholders for working capital
loans previously made. For this period, such expense amounted to
$5,424. For the three month period ending November 30, 2010, interest
expense was $381, the same amount as it was for the comparable period during
2009.
Off-Balance
Sheet Arrangements
We are
not currently a party to, or otherwise involved with, any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
material effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources.
Contractual
Obligations
As a
“smaller reporting company” as defined by Item 10 of Regulation S-K, the Company
is not required to provide this information.
Recently
Issued Accounting Pronouncements
In
October 2009, the FASB issued guidance for amendments to FASB Emerging Issues
Task Force on EITF Issue No. 09-1 “Accounting for Own-Share Lending
Arrangements in Contemplation of a Convertible Debt Issuance or Other
Financing” (Subtopic 470-20) “Subtopic.” This accounting standards update
establishes the accounting and reporting guidance for arrangements under which
own-share lending arrangements issued in contemplation of convertible debt
issuance. This Statement is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15,
2009. Earlier adoption is not permitted. Management
believes this Statement will have no impact on the financial statements of the
Company once adopted.
13
In
January 2010, the FASB issued guidance to amend the disclosure requirements
related to recurring and nonrecurring fair value measurements. The guidance
requires new disclosures on the transfers of assets and liabilities between
Level 1 (quoted prices in active market for identical assets or liabilities) and
Level 2 (significant other observable inputs) of the fair value measurement
hierarchy, including the reasons and the timing of the
transfers. Additionally, the guidance requires a roll forward of activities
on purchases, sales, issuance, and settlements of the assets and liabilities
measured using significant unobservable inputs (Level 3 fair value
measurements). The guidance is effective for us with the reporting period
beginning February 28, 2010, except for the disclosure on the roll forward
activities for Level 3 fair value measurements, which will become effective for
us with the reporting period beginning January 1, 2011. Other than requiring
additional disclosures, we do not expect that adoption of this new guidance will
have a material impact on our financial statements, if any.
Management
does not believe any other recently issued, but not yet effective, accounting
standards, if currently adopted, could have a material effect on the
accompanying financial statements.
Significant
Accounting Estimates
The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Significant estimates made by management include, but are not
limited to, the amount of unbilled vendors payable for services performed during
the reporting period. Actual results may differ from these estimates and
assumptions.
Critical
Accounting Policies
Income
taxes are accounted for in accordance with ASC 740, Accounting for Income Taxes.
ASC 740 requires the recognition of deferred tax assets and liabilities to
reflect the future tax consequences of events that have been recognized in the
Company’s financial statements or tax returns. Measurement of the deferred items
is based on enacted tax laws. In the event the future consequences of
differences between financial reporting bases and tax bases of the Company’s
assets and liabilities result in a deferred tax asset, ASC 740 requires an
evaluation of the probability of being able to realize the future benefits
indicated by such assets. A valuation allowance related to a deferred tax asset
is recorded when it is more likely than not that some or the entire deferred tax
asset will not be realized.
For
federal income tax purposes, substantially all expenses must be deferred until
the Company commences business and then they may be written off over a 60-month
period. These expenses will not be deducted for tax purposes and will
represent a deferred tax asset. The Company will provide a valuation
allowance in the full amount of the deferred tax asset since there is no
assurance of future taxable income. Tax deductible losses can be
carried forward under current applicable law for 20 years until
utilized.
Item
3. Quantitative and Qualitative Disclosures About Market Risk.
As a
“smaller reporting company” as defined by Item 10 of Regulation S-K, the Company
is not required to provide information required by this Item.
Item
4. Controls and Procedures.
Evaluation of Disclosure Controls and
Procedures
As of
November 30, 2010, our management, consisting of our Chief Executive Officer and
our Chief Financial Officer, evaluated the effectiveness of our disclosure
controls and procedures pursuant to Rule 13a-15(b) promulgated under the
Exchange Act. Based upon that evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that, as of November 30, 2010, our
disclosure controls and procedures were effective in ensuring that material
information required to be disclosed in the reports that we file or submit under
the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission’s rules and forms,
including ensuring that such material information is accumulated and
communicated to our President and our Chief Financial Officer, as appropriate to
allow timely decisions regarding required disclosure.
14
Changes in Internal Control Over
Financial Reporting
During
the quarter ended November 30, 2010, there were no changes in our internal
control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
PART
II — OTHER INFORMATION
Item 1. Legal
Proceedings.
To the
best knowledge of the officers and directors, the Company is not a party to any
legal proceeding or litigation.
Item
1A. Risk Factors.
As a
“smaller reporting company” as defined by Item 10 of Regulation S-K, the Company
is not required to provide information required by this Item.
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior
Securities.
None.
Item 4. Submission of Matters to a
Vote of Security Holders.
None.
Item 5. Other
Information.
None.
Item 6. Exhibits.
Exhibits
required by Item 601 of Regulation S-K.
15
Exhibit
No.
|
Description
|
|
*3.1
|
Certificate
of Incorporation, as filed with the Delaware Secretary of State on August
14, 2006.
|
|
*3.2
|
By-Laws.
|
|
31.1
|
Certification
of the Company’s Principal Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly
Report on Form 10-Q for the quarter ended November 30,
2010.
|
|
31.2
|
Certification
of the Company’s Principal Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly
Report on Form 10-Q for the quarter ended November 30,
2010.
|
|
32.1
|
Certification
of the Company’s Principal Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
32.2
|
Certification
of the Company’s Principal Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
*
|
Filed as an exhibit to the
Company's Registration Statement on Form 10-SB, as filed with the
Securities and Exchange Commission on January 30, 2007, and incorporated
herein by this reference.
|
16
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated:
January 19, 2011
|
GCA
I ACQUISITION CORP.
|
|
By:
|
/s/ Michael M. Membrado
|
|
Michael
M. Membrado
President,
Chief Executive Officer,
Chief
Financial Officer, and
Director
|
17