Attached files

file filename
EX-32.2 - Africa Growth Corpex32-2.htm
EX-32.1 - Africa Growth Corpex32-1.htm
EX-31.2 - Africa Growth Corpex31-2.htm
EX-31.1 - Africa Growth Corpex31-1.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 10-Q

 

 

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2017

 

OR

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______________ to ______________

 

Commission file number: 333-169507

 

Africa Growth Corporation

(Exact Name Of Registrant As Specified In Its Charter)

 

Nevada   27-2413874
(State of Incorporation)   (I.R.S. Employer Identification No.)
     
41 Cedar Avenue, Hamilton, Bermuda   HM 12
(Address of Principal Executive Offices)   (ZIP Code)

 

Registrant’s Telephone Number, Including Area Code: (+44) 203 862 2920

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer [  ] Accelerated filer [  ]  
  Non-accelerated filer [  ] Smaller reporting company [X]  
    Emerging growth company [  ]  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

The number of shares outstanding of each of the issuer’s classes of equity as of June 30, 2017 is 998,060 shares of common stock.

 

 

 

   

 

 

TABLE OF CONTENTS

 

Item   Description   Page
         
    PART I – FINANCIAL INFORMATION    
ITEM 1.   FINANCIAL STATEMENTS   3
ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   10
ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   11
ITEM 4.   CONTROLS AND PROCEDURES   11
         
    PART II – OTHER INFORMATION    
ITEM 1.   LEGAL PROCEEDINGS   12
ITEM 1A.   RISK FACTORS   12
ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS   12
ITEM 3.   DEFAULTS UPON SENIOR SECURITIES   12
ITEM 4.   MINE SAFETY DISCLOSURES   12
ITEM 5.   OTHER INFORMATION   12
ITEM 6.   EXHIBITS   12

 

   

 

 

Table of Contents

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

Financial Statements

 

Unaudited Consolidated Balance Sheets – June 30, 2017 and December 31, 2016 4
Unaudited Consolidated Statements of Operations – Three Months and Six Months Ended June 30, 2017 and 2016 5
Unaudited Consolidated Statements of Cash Flows – Six Months Ended June 30, 2017 and 2016 6
Notes to Unaudited Consolidated Financial Statements 7

 

 3 

 

 

Table of Contents

 

AFRICA GROWTH CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

  

June 30, 2017

   December 31, 2016 
ASSETS          
Current assets:          
Cash and cash equivalents  $10   $10 
Total assets  $10   $10 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current liabilities:          
Accounts payable and accrued expenses  $28,574   $20,880 
Accounts payable – related parties   88,665    18,100 
Total current liabilities   117,239    38,980 
           
Commitments and contingencies          
           
Stockholders’ deficit:          
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding   -    - 
Common stock, $0.0001 par value, 200,000,000 shares authorized; 998,060 shares issued and outstanding   100    100 
Less: treasury stock, at cost; 1,313 shares   (4,728)   (4,728)
Additional paid-in capital   1,005,711    1,005,711 
Accumulated deficit   (1,118,312)   (1,040,053)
Total stockholders’ deficit   (117,229)   (38,970)
Total liabilities and stockholders’ deficit  $10   $10 

 

See accompanying notes to the unaudited consolidated financial statements.

 

 4 

 

 

Table of Contents

 

AFRICA GROWTH CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016

(Unaudited)

 

   For the Three Months Ended   For the Six Months Ended 
   June 30,   June 30, 
   2017   2016   2017   2016 
Operating expenses:                    
General and administrative  $52,183   $47,708   $78,259   $80,559 
Total operating expenses   52,183    47,708    78,259    80,559 
                     
Loss from discontinued operations   -    (225)   -    (225)
                     
Net loss  $(52,183)  $(47,933)  $(78,259)  $(80,784)
                     
Net loss per common share – basic and diluted  $(0.05)  $(0.07)  $(0.08)  $(0.13)
                     
Weighted average number of common shares outstanding – basic and diluted   998,060    641,468    998,060    641,466 

 

See accompanying notes to the unaudited consolidated financial statements.

 

 5 

 

 

Table of Contents

 

AFRICA GROWTH CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016

(Unaudited)

 

  

For the Six Months Ended

June 30,

 
   2017   2016 
Cash flows from operating activities:          
Net loss  $(78,259)  $(80,784)
Loss from discontinued operation   -    225 
Loss from continuing operations   (78,259)   (80,559)
Adjustments to reconcile net loss to cash used in operating activities:          
Accounts payable and accrued expenses   7,694    675 
Net cash used in operating activities   (70,565)   (79,884)
           
Cash flows from financing activities:          
Advances from related parties, net   70,565    - 
Net cash provided by financing activities – continuing operations   70,565    - 
Net cash provided by financing activities – discontinued operations   -    79,989 
Net cash provided by financing activities   70,565    79,989 
           
Net increase in cash   -    105 
Cash and cash equivalents, beginning of period   10    6,051 
Cash and cash equivalents, end of period  $10   $6,156 
           
Supplemental disclosures:          
Interest paid  $-   $- 
Income taxes paid  $-   $- 

 

See accompanying notes to the unaudited consolidated financial statements.

 

 6 

 

 

Table of Contents

 

AFRICA GROWTH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited interim consolidated financial statements of Africa Growth Corporation (“AFGC”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in AFGC’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2016. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the unaudited interim consolidated financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year as reported in the Form 10-K have been omitted.

 

Organization, Ownership and Business

 

Africa Growth Corporation (formerly known as Brenham Oil & Gas Corp. (hereinafter the “Company”, the “Registrant”, or “AFGC”), a Nevada corporation, was incorporated on April 21, 2010.

 

On November 9, 2016, the Company filed an amended Preliminary Information Statement on Schedule 14C with full disclosure required by Items 11 through 14 of Schedule 14A, including but not limited to the audited financial statements of the Registrant and Africa International Capital Ltd (“AIC”) as well as the pro forma consolidated financial statements of the Registrant and AIC as required by Schedule 14A together with additional disclosure regarding the business of AIC. Further, in connection with the Closing the Registrant’s Board of Directors effected the change of control of the Registrant.

 

On December 12, 2016, the Company filed the Definitive Preliminary Information Statement on Schedule 14C.

 

In December 2016, the Company issued 71,206,464 pre-reverse split shares of common stock to Crescat Ventures Ltd, as a part issuance in connection with the Merger.

 

On January 17, 2017, pursuant to the Contribution Agreement filed as Exhibit 2.2 of the Merger Agreement form 8-K, AIII assumed all of the Company’s existing liabilities in consideration and exchange for the Company assigning to a nominee of AIII all of the Company’s existing developed and undeveloped oil and gas assets. As of December 31, 2016, the Company’s oil and gas operations as well as the related liabilities were considered discontinued operations.

 

On January 30, 2017, the Company completed a one-for-two hundred reverse split of its 199,500,000 shares of issued and outstanding common stock (the “Reverse Split”). Further on this date the Company’s name was changed to Africa Growth Capital. All the outstanding shares have been retrospectively adjusted to reflect the reverse stock split as required by the terms of such securities with a proportional increase in the related share price.

 

On February 21, 2017, the Company paid $5,000 to AIII for merger related expenses incurred by AIII.

 

On April 10, 2017, the Company incorporated a new subsidiary, Namibia Mortgage Acceptance Corporation a Delaware incorporated company, to launch the Company’s lower and middle income mortgage acceptance business in Namibia and for funding purposes to facilitate the Company’s intention launch a Regulation D (506(c)) offering with the U.S. Securities and Exchange Commission (“SEC”). The purpose of the offering is to secure funds through accredited investors to facilitate access to financing solutions and promote homeownership in Namibia.

 

On July 7, 2017, in connection with the merger agreement the Company issued 100,000 shares of a new class of super-voting common stock with all of the economic rights of existing common stock except that such common stock will have 5,000 votes for each share, which shall be designated Common Stock Series C.

 

The Company is in the process of completing the remaining steps to finalize the merger between the Company and AIC. The resulting merger financial statements are to be filed thereafter.

 

 7 

 

 

Use of Estimates

 

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

 

Going Concern

 

The consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.

 

Prior to the execution of the merger agreement the Company generated losses with negligible revenues and did not anticipate generating any revenues in the near-term, which raised substantial doubt about the Company’s ability to continue to operate as a going concern.

 

As of June 30, 2017, there remains substantial doubt about the Company’s ability to continue to operate as a going concern for the twelve months following the filing of these financial statements. The Company transferred its oil and gas assets to a nominee of AII under the contribution and merger agreements and is in the process of finalizing of the merger with AIC.

 

Post-merger the Company intends to continue as a going concern through the underlying operating and revenue generating business of AIC and external financing, should it be required and available. These financials do not include any adjustments relating to the recoverability and reclassification of recorded asset amounts, or amounts and classifications of liabilities that might result from this uncertainty.

 

Cash and Cash Equivalents

 

AFGC considers all short-term securities purchased with a maturity of three months or less to be cash equivalents.

 

   
 

 

Table of Contents

 

Income Taxes

 

The Company is a taxable entity and recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to be in effect when the temporary differences reverse. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the enactment date of the rate change. A valuation allowance is used to reduce deferred tax assets to the amount that is more likely than not to be realized. Interest and penalties associated with income taxes are included in selling, general and administrative expense.

 

The Company has adopted ASC 740-10 “Accounting for Uncertainty in Income Taxes,” which prescribes a comprehensive model of how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. ASC 740-10 states that a tax benefit from an uncertain position may be recognized if it is “more likely than not” that the position is sustainable, based upon its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. As of June 30, 2017, AFGC had not recorded any tax benefits from uncertain tax positions.

 

Net Loss Per Common Share

 

Net loss per common share is computed by dividing the net loss by the weighted average number of shares outstanding during a period. The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. Basic and diluted net losses per share were the same, as there were no common stock equivalents outstanding.

 

Reclassifications

 

Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation including adjustments to reflect the presentation of discontinued operations related to the merger described above.

 

 8 

 

 

Table of Contents

 

Recent Accounting Pronouncements

 

The Company adopted an ASU issued by the FASB requiring, when applicable, disclosures regarding uncertainties about an entity’s ability to continue as a going concern. During the preparation of quarterly and annual financial statements, management should evaluate whether conditions or events exist that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued. If this evaluation indicates that it is probable that an entity will be unable to meet its obligations when they become due within one year of the financial statement issuance date, management must evaluate whether its mitigation plans will alleviate the substantial doubt of continuing as a going concern. If substantial doubt exists, regardless of whether the mitigation plan alleviates the concern, additional disclosures are required in the financial statements addressing the conditions or events that raise substantial doubt, management’s evaluation of the significance of those conditions or events, and management’s mitigation plans.

 

Subsequent Events

 

The Company has evaluated all transactions through the date the consolidated financial statements were issued for subsequent event disclosure consideration.

 

Note 2. Accounts Payable – Related Parties

 

Related party accounts payable at June 30, 2017 consisted of $88,655 (December 31, 2016: $18,100) owed to AIC for the funding of the Company’s operations.

 

The advances to the Company are non-interest bearing and due on demand.

 

 9 

 

 

Table of Contents

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

As used in this Quarterly Report, the terms “we”, “us”, “our” and the “Company” means Africa Growth Corporation a Nevada corporation. To the extent that we make any forward-looking statements in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report, we emphasize that forward-looking statements involve risks and uncertainties and our actual results may differ materially from those expressed or implied by our forward-looking statements. Our forward-looking statements in this Quarterly Report reflect our current views about future events and are based on assumptions and are subject to risks and uncertainties. Generally, forward-looking statements include phrases with words such as “expect”, “anticipate”, “intend”, “plan”, “believe”, “seek”, “estimate” and similar expressions to identify forward-looking statements.

 

The following disclosure in Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand our historical results of operations during the periods presented and our financial condition. This MD&A should be read in conjunction with our consolidated financial statements and the accompanying notes to consolidated financial statements for the years ended December 31, 2016 and 2015. It should be understood that as a result of the expected closing of the Merger Agreement with AIC in 2017 our historical results are not expected to be indicative of our future results.

 

Recent Developments

 

On April 25, 2016, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Africa International Capital Ltd., a Bermuda corporation (“AIC”) pursuant to which a wholly-owned subsidiary of the Registrant will be merged into AIC which will be the surviving entity and will become a subsidiary of the Registrant. The Registrant expects the Merger Agreement to close in the third quarter of 2017.

 

In addition, on April 25, 2016, the Registrant also entered into a Contribution Agreement with its corporate parent and principal shareholder, American International Industries, Inc., a Nevada corporation (“AIII”), pursuant to which, at the closing of the Merger, AIII will assume all of Brenham’s existing liabilities and working capital at the Closing in consideration and exchange for Brenham assigning to AIII all of Brenham’s existing developed and undeveloped oil and gas assets.

 

Three Months Ended June 30, 2017 versus Three Months Ended June 30, 2016

 

Net loss for the three months ended June 30, 2017 was $52,183, compared to $47,933 for the three months ended June 30, 2016 and consisted primarily of general and administrative legal and professional expenses.

 

Due to the discontinuation of the operation of the oil and gas leases in 2016 and subsequent transfer to AIII in relation to the merger, there were no oil and gas revenues or operating expenses recorded.

 

Six Months Ended June 30, 2017 versus Six Months Ended June 30, 2016

 

Net loss for the six months ended June 30, 2017 was $78,259, compared to $80,784 for the six months ended June 30, 2016 and consisted primarily of general and administrative legal and professional expenses.

 

Due to the discontinuation of the operation of the oil and gas leases in 2016 and subsequent transfer to AIII in relation to the merger, there were no oil and gas revenues or operating expenses recorded.

 

Liquidity and Capital Resources

 

At June 30, 2017 and December 31, 2016, total assets were $10, respectively. At June 30, 2017, total liabilities were $117,239, consisting of $28,574 in accounts payable and accrued expenses and $88,665 of accounts payable to related parties. At December 31, 2016, total liabilities were $38,980, consisting of $20,880 in accounts payable and accrued expenses and $18,100 in accounts payable to related parties.

 

We had cash flow used in operations of $70,565 during the six months ended June 30, 2017, principally due to a net loss of $78,259. We had cash used in operations of $79,884 during the six months ended June 30, 2016, principally due to a net loss of $80,784. The losses in 2017 were supported by related parties who provided financing of $70,565. The prior period financing activities were provided by AIII and are recorded as a discontinued operation following the transfer of the oil and gas properties to AIII.

 

For the three months ended June 30, 2017 and 2016, we had no cash flows from investing activities.

 

Please refer to the Definitive Information Statement on Schedule 14C filed on December 12, 2016 for discussion on the Company’s post-merger financial condition and liquidity.

 

Contractual Obligations

 

As of June 30, 2017, the Company did not have any contractual obligations.

 

Off-Balance Sheet Arrangements

 

As of June 30, 2017, and December 31, 2016, the Company did not have any off-balance sheet arrangements.

 

 10 

 

 

Table of Contents

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. The disclosures are not meant to be precise indicators of expected future results, but rather indicators of reasonably possible results. This forward-looking information provides indicators of how we view and manage our ongoing market risk exposures. All of our market risk sensitive instruments will be entered into for purposes of risk management and not for speculation.

 

Reference is made and incorporated herein to the amended Preliminary Information Statement on Schedule 14C filed on November 9, 2016 for discussion on AFGC’s post-merger financial condition and liquidity.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of disclosure controls and procedures. As of June 30, 2017, the Company’s chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures as provided under the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013), our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report. Management has identified corrective actions for the weakness and plans to begin implementation of these corrective actions shortly.

 

Changes in internal controls. During the quarterly period covered by this report, no changes occurred in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 11 

 

 

Table of Contents

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

None.

 

ITEM 1A. RISK FACTORS

 

For the three months ended June 30, 2017, there were no material changes from risk factors as disclosed in Company’s annual report on Form 10-K for the year ended December 31, 2016.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

 

The following documents are filed as exhibits to this report on Form 10-Q or incorporated by reference herein. Any document incorporated by reference is identified by a parenthetical reference to the SEC filing that included such document.

 

Exhibit No.   Description
     
31.1   Certification of CEO Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to the Sarbanes-Oxley Act of 2002
     
31.2   Certification of CFO Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to the Sarbanes-Oxley Act of 2002
     
32.1   Certification of CEO Pursuant to Section 906 of Sarbanes-Oxley Act of 2002
     
32.2   Certification of CFO Pursuant to Section 906 of Sarbanes-Oxley Act of 2002
     

 

 12 

 

 

Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

By /s/ Christopher Darnell  
  Christopher Darnell  
  Chief Executive Officer, President, and Chairman  
  August 21, 2017  
     
By /s/ Brenton Kuss  
  Brenton Kuss  
  Chief Financial Officer  
  August 21, 2017  

 

 13