Attached files
| file | filename |
|---|---|
| EX-32.2 - CERTIFICATION - RC-1, Inc. | rc1_ex3202.htm |
| EX-32.1 - CERTIFICATION - RC-1, Inc. | rc1_ex3201.htm |
| EX-31.2 - CERTIFICATION - RC-1, Inc. | rc1_ex3102.htm |
| EX-31.1 - CERTIFICATIONS - RC-1, Inc. | rc1_ex3101.htm |
| EX-10.2 - MEMBERSHIP INTEREST PURCHASE AGREEMENT DATED AS OF MAY 31, 202 - RC-1, Inc. | rc1_ex1002.htm |
| EX-10.1 - AGREEMENT AND PLAN OF MERGER DATED AS OF MAY 31, 2021 - RC-1, Inc. | rc1_ex1001.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________ to ___________.
Commission file number 333-210960
RC-1, INC.
(Exact name of small business issuer as specified in its charter)
| Nevada | 26-1449268 | |
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
301 S. State Street
Suite S103
Newtown, PA 18940
(Address of principal executive offices)
484-249-9801
(Issuer’s telephone number)
___________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| N/A | N/A | N/A |
Check whether the issues (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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. (Check one)
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Non-accelerated filer ☐ | Smaller reporting company ☒ | |
| 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 ☒
There were 95,789,474 shares of the registrant’s common stock, $0.001 par value per share, outstanding on May 28, 2021.
RC-1, INC.
| 2 |
PART I – FINANCIAL INFORMATION
RC-1 Inc.
(Home Integrator Holdings, LLC, a wholly owned subsidiary)
Condensed Consolidated Balance Sheets
| March 31, 2021 | December 31, 2020 | |||||||
| ASSETS | (unaudited) | |||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | 241,750 | $ | 21,501 | ||||
| Accounts receivable, net | 48,703 | 19,689 | ||||||
| Inventory | 73,672 | 19,130 | ||||||
| Total current assets | 364,125 | 60,320 | ||||||
| PROPERTY AND EQUIPMENT | ||||||||
| Property and equipment | 35,901 | 35,901 | ||||||
| Accumulated depreciation | (6,582 | ) | (4,787 | ) | ||||
| Net property and equipment | 29,319 | 31,114 | ||||||
| OTHER ASSETS | ||||||||
| Deposit | 3,500 | – | ||||||
| Total other assets | 3,500 | – | ||||||
| Total Assets | $ | 396,944 | $ | 91,434 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | 48,060 | $ | 92,206 | ||||
| Accrued liabilities | 56,741 | 38,261 | ||||||
| Customer deposits | 41,718 | – | ||||||
| Note payable, current portion | 5,277 | 5,277 | ||||||
| Note payable, related party | 95,491 | 95,491 | ||||||
| Total current liabilities | 247,287 | 231,235 | ||||||
| LONG TERM LIABILITIES | ||||||||
| Note payable, long term portion | 17,364 | 20,861 | ||||||
| Total long term liabilities | 17,364 | 20,861 | ||||||
| Total Liabilities | 264,651 | 252,096 | ||||||
| Commitments and Contingencies | – | |||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock,$0.001 par value, 10,000,000 shares authorized; Series A 100,000 and 0 issued and outstanding | 100 | – | ||||||
| Common stock,$0.001 par value; 250,000,000 shares authorized; 95,789,474 and 80,000,000 issued and outstanding | 95,789 | 80,000 | ||||||
| Additional paid in capital | 496,076 | (71,642 | ) | |||||
| Accumulated deficit | (459,672 | ) | (169,020 | ) | ||||
| Total stockholders’ equity | 132,293 | (160,662 | ) | |||||
| Total Liabilities and Stockholders’ Equity | $ | 396,944 | $ | 91,434 | ||||
| 3 |
RC-1 Inc.
(Home Integrators Holding, LLC, a wholly owned subsidiary)
Condensed Consolidated Statements of Operations
Three months ended March 31,
| 2021 | 2020 | |||||||
| REVENUES | (unaudited) | (unaudited) | ||||||
| Revenue | $ | 61,854 | $ | – | ||||
| COST OF SALES | ||||||||
| Cost of sales | 33,306 | – | ||||||
| Gross margin | 28,548 | – | ||||||
| OPERATING EXPENSES | ||||||||
| General and administrative | 112,041 | – | ||||||
| Depreciation expense | 1,795 | – | ||||||
| Wages | 128,706 | – | ||||||
| Professional fees | 76,104 | – | ||||||
| Total operating expenses | 318,646 | – | ||||||
| Loss from operations | (290,098 | ) | – | |||||
| Other expense | ||||||||
| Interest expense | 554 | – | ||||||
| Total other expense | 554 | – | ||||||
| Net loss before income taxes | (290,652 | ) | – | |||||
| Income taxes | – | – | ||||||
| Net loss | $ | (290,652 | ) | $ | – | |||
| Net loss per share (basic and diluted) | $ | 0.00 | $ | – | ||||
| Weighted average shares outstanding, (basic and diluted) | 90,536,550 | 80,000,000 | ||||||
| 4 |
RC-1 Inc.
(Home Integrator Holdings, LLC, a wholly owned subsidiary)
Condensed Consolidated Statement of Changes in Stockholders’ Equity
For the three months ended March 31, 2021
(unaudited)
| Preferred | Common | Additional | Total | |||||||||||||||||||||||||
Number of Shares |
Par Value | Number of Shares | Par Value | Paid in Capital | Accumulated Deficit | Stockholders’ Equity | ||||||||||||||||||||||
| BALANCE, January 1, 2021 | – | $ | – | 80,000,000 | $ | 80,000 | $ | (71,642 | ) | $ | (169,020 | ) | $ | (160,662 | ) | |||||||||||||
| Issuance of shares for cash | – | – | 5,789,474 | 5,789 | 544,211 | – | 550,000 | |||||||||||||||||||||
| Amortization of option grant compensation | – | – | – | – | 33,606 | – | 33,606 | |||||||||||||||||||||
| Issuance of shares to effect acquisition | 100,000 | 100 | 10,000,000 | 10,000 | (10,100 | ) | – | – | ||||||||||||||||||||
| Net loss | – | – | – | – | – | (290,652 | ) | (290,652 | ) | |||||||||||||||||||
| BALANCE, March 31, 2021 | 100,000 | $ | 100 | 95,789,474 | $ | 95,789 | $ | 496,076 | $ | (459,672 | ) | $ | 132,293 | |||||||||||||||
RC-1 Inc.
(Home Integrator Holdings, LLC, a wholly owned subsidiary)
Condensed Consolidated Statement of Changes in Stockholders’ Equity
For the three months ended March 31, 2020
(unaudited)
| Preferred | Common | Additional | Total | |||||||||||||||||||||||||
Number of Shares |
Par Value | Number of Shares | Par Value | Paid in Capital | Accumulated Deficit | Stockholders’ Equity | ||||||||||||||||||||||
| BALANCE, January 1, 2020 | – | $ | – | 80,000,000 | $ | 80,000 | $ | (79,975 | ) | $ | – | $ | 25 | |||||||||||||||
| Net activity for the period | – | – | – | – | – | – | – | |||||||||||||||||||||
| – | ||||||||||||||||||||||||||||
| BALANCE, March 31, 2020 | – | $ | – | 80,000,000 | $ | 80,000 | $ | (79,975 | ) | $ | – | $ | 25 | |||||||||||||||
| 5 |
RC-1 Inc.
(Home Integrator Holdings, LLC, a wholly owned subsidiary)
Condensed Consolidated Statements of Cash Flows
For the three months ended March 31,
| 2021 | 2020 | |||||||
| (unaudited) | (unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (290,652 | ) | $ | – | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 1,795 | – | ||||||
| Share based compensation | 33,606 | – | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Increase in accounts receivable | (29,014 | ) | – | |||||
| Increase in inventory | (54,542 | ) | – | |||||
| Increase in deposits | (3,500 | ) | – | |||||
| Decrease in accounts payable | (44,146 | ) | – | |||||
| Increase in accrued liabilities | 18,481 | – | ||||||
| Increase in customer deposits | 41,718 | – | ||||||
| Net cash used in operating activities | (326,254 | ) | – | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES | – | – | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Payments on third party debt | (3,497 | ) | – | |||||
| Proceeds from sale of shares of common stock | 550,000 | – | ||||||
| Net cash provided by financing activities | 546,503 | – | ||||||
| Net increase in cash | 220,249 | – | ||||||
| CASH, January 1, | 21,501 | – | ||||||
| CASH, end of period | $ | 241,750 | $ | – | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Interest paid in cash | $ | 554 | $ | – | ||||
| Income tax paid in cash | $ | – | $ | – | ||||
| Non-Cash Investing and Financing Activities: | ||||||||
| Common stock issued to effect acquisition | $ | (10,000 | ) | $ | – | |||
| Preferred stock issued to effect acquisition | $ | (100 | ) | $ | – | |||
| 6 |
RC-1 Inc.
(Home Integrator Holdings, LLC, a wholly owned subsidiary)
Notes to Condensed Consolidated Financial Statements
(Information with respect to the three months ended March 31, 2021 and 2020 is unaudited)
(1) ORGANIZATION AND NATURE OF OPERATIONS
RC-1 Inc., (the “Company” or “RC-1"), was incorporated under the laws of the State of Nevada on May 14, 2009. On February 1, 2021, RC-1 entered into a Share Exchange Agreement with HIH, whereby HIH became a wholly owned subsidiary. The Share Exchange has been treated as a recapitalization and reverse acquisition of the Company for financial accounting purposes and HIH is considered the acquirer for financial reporting purposes. This means that the Company’s historical financial statements before the acquisition have been replaced with the historical financial statements of HIH before the acquisition in this quarterly report and future filings with the U.S. SEC. Concurrently with the acquisition the legacy net assets and liabilities of RC-1 were spun off to the RC-1 former management.
The Home Integrator of the Delaware Valley, LLC, (“HIDV”) was formed on January 27, 2020, under the laws of the State of Delaware. In November 2020, HIDV became a wholly owned subsidiary of The Home Integrator Holdings, LLC., (“the Company,” or “HIH”), an entity formed on January 28, 2020, under the laws of the State of Delaware. The transaction was accounted for as a recapitalization, with retrospective treatment.
The Company’s business activities are primarily integrating smart appliances and security systems for residences.
The accompanying consolidated financial statements include the activities of RC-1, Inc.; The Home Integrator Holdings, LLC and The Home Integrators of the Delaware Valley, LLC, its wholly owned subsidiaries.
(2) LIQUIDITY AND GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the three months ended March 31, 2021, the Company recorded a loss of approximately $290,600 and has an accumulated deficit of approximately $460,000 at March 31, 2021. The ability of the Company to continue as a going concern is dependent upon increasing operations, developing sales and obtaining additional capital and financing. The Company is seeking to raise sufficient equity capital to enable it to continue to grow its operations and to enable it to pay off its existing indebtedness. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation and Principles of Consolidation The Company’s consolidated financial statements include the financial statements of RC-1, Home Integrator Holdings, LLC and, The Home Integrator of the Delaware Valley, LLC, its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.
The accompanying condensed consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles ("GAAP") in the United States of America ("U.S.") as promulgated by the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") and with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). The condensed consolidated financial statements reflect all normal recurring adjustments, which, in the opinion of management, are considered necessary for a fair presentation of the results for the period shown. The results of operations for the three months ended March 31, 2021, presented are not necessarily indicative of the results expected for any future period.
Use of Estimates The preparation of the financial statements in conformity 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates in the accompanying consolidated financial statements involved the valuation of depreciable lives of the fixed assets, valuation of long lived assets, recoverability of accounts receivables and valuation of equity issued as compensation.
| 7 |
RC-1 Inc.
(Home Integrator Holdings, LLC, a wholly owned subsidiary)
Notes to Condensed Consolidated Financial Statements
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b) Cash and cash equivalents The Company considers all highly liquid securities with original maturities of three months or less when acquired, to be cash equivalents. The Company had no financial instruments that qualified as cash equivalents at March 31, 2021, or December 31, 2020.
c) Inventories Inventories consist of equipment to be installed and supplies and are valued at the lower of cost (first-in, first-out method) or market using the specific identification method.
d) Property and equipment All property and equipment are recorded at cost and depreciated over their estimated useful lives, generally three, five or seven years, using the straight-line method. Upon sale or retirement, the cost and related accumulated depreciation are eliminated from their respective accounts, and the resulting gain or loss is included in the results of operations. Repairs and maintenance charges, which do not increase the useful lives of the assets, are charged to operations as incurred.
e) Impairment of long-lived assets A long-lived asset is tested for impairment whenever events or changes in circumstances indicate that its carrying value amount may not be recoverable. An impairment loss is recognized when the carrying amount of the asset exceeds the sum of the undiscounted cash flows resulting from its use and eventual disposition. The impairment loss is measured as the amount by which the carrying amount of the long-lived assets exceeds its fair value.
f) Financial instruments and Fair value measurements ASC 825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.
ASC 825 also requires disclosures of the fair value of financial instruments. The carrying value of the Company’s current financial instruments, which include cash, accounts payable, accrued liabilities and notes payable approximates their fair values because of the short-term maturities of these instruments and market interest.
FASB ASC 820 “Fair Value Measurement” clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. It also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability.
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
| 8 |
RC-1 Inc.
(Home Integrator Holdings, LLC, a wholly owned subsidiary)
Notes to Condensed Consolidated Financial Statements
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
g) Revenue recognition The Company recognizes revenues under the framework prescribed in ASC 606 “Revenues from Contracts with Customers”. This revenue recognition standard has a five step process: a) Determine whether a contract exists; b) Identify the performance obligations; c) Determine the transaction price; d) Allocate the transaction price; e) Recognize revenue when (or as) performance obligations are satisfied. The Company’s principal operations are the installation of integrated systems in homes with payment due upon completion, which corresponds to a single performance obligation. Revenue is recognized upon completion, (delivery and installation), of the contract as the performance obligation is satisfied by transferring control of the goods and services to the customer.
h) Income Taxes Prior to the February 1, 2021, acquisition HIH was a limited liability company taxed as a partnership. The Partnership is not a taxpaying entity for federal or state income tax purposes; accordingly, a provision for income taxes had not been recorded in the accompanying financial statements. Partnership income or losses for periods prior to the February 1, 2021 acquisition were reflected in the partners’ individual or corporate tax returns in accordance with their ownership percentages.
As defined by Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 740, “Income Taxes” no provision or liability for materially uncertain tax positions was deemed necessary by management. Therefore, no provision or liability for uncertain tax positions has been included in these financial statements.
i) Recent accounting pronouncements Certain FASB Accounting Standard Updates (“ASU”) that are not effective are not expected to have a significant effect on the Company’s consolidated financial position or results of operations.
(4) ACCOUNTS RECEIVABLE
The Company adopted Financial Accounting Standards Board Accounting Standards Update (ASU) 2016-13 (Topic 326) “Measurement of Credit Losses on Financial Instruments” at inception. This ASU requires the Company to report its trade receivables not held for sale net of an allowance for credit losses. At March 31, 2021 and December 31, 2020, accounts receivable are reflected net of an allowance for credit losses in the amount of $0 and $5,047, respectively.
(5) PROPERTY AND EQUIPMENT
Property and Equipment consisted of the following:
| March 31, 2021 | December 31, 2020 | |||||||
| Fixed Assets | $ | 35,901 | $ | 35,901 | ||||
| Less: accumulated depreciation | (6,582 | ) | (4,787 | ) | ||||
| Total P&E | $ | 29,319 | $ | 31,114 | ||||
Depreciation expense for the three months ended March 31, 2021 and 2020 was $1,795 and $0, respectively.
| 9 |
RC-1 Inc.
(Home Integrator Holdings, LLC, a wholly owned subsidiary)
Notes to Condensed Consolidated Financial Statements
(6) NOTES PAYABLE
During 2020, the Company, through its wholly owned subsidiary, HIDV, entered into two notes payable.
One note in the amount of $95,491 is owed to a related party under a demand note that carries no interest.
The second note is payable to a third party at a rate of $576 monthly, has a remaining principal balance of $22,641 and $26,138 at March 31, 2021 and December 31, 2020, carries a 6.99% interest rate and matures in April 2025. This note is secured by a vehicle owned by HIDV. The future commitments under this note are: 2021 - $3,992; 2022 - $5,658; 2023 - $6,066; 2024 - $6,504 and 2025 - $421.
(7) COMMITMENTS AND CONTINGENCIES
a) Legal Matters From time to time, the Company may be involved in asserted claims or litigation relating to claims arising out of operations in the normal course of business. As of March 31, 2021, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s operations.
(8) STOCKHOLDERS’ EQUITY
At March 31, 2021and December 31, 2020, the Company is authorized to issue 250,000,000 shares of $0.001 par value common stock and has 95,789,474 and 80,000,000 shares issued and outstanding, respectively. At March 31, 2021, and December 31, 2020, the Company is authorized to issue 10,000,000 shares of $0.001 par value preferred stock and has 100,000 Series A and 0 shares issued and outstanding, respectively.
In the first quarter 2021, the Company issued 5,789,474 shares of common stock in exchange for $550,000 in cash. On February 1, 2021, the Company issued 10,000,000 shares of common stock to effect the reverse acquisition.
On December 1, 2020, the HIH granted 400,000 Class I units to an employee. The units vest at a rate of 100,000 units on the annual anniversary date of the grant and require the employee to be continuously employed at the Company during the vesting year. These units have a stated capital account of zero for U.S. IRS tax Code purposes. The Company has calculated the fair value of the Class I units at $1.00 per unit, (total value $400,000). The Company was amortizing the grant value over the vesting period as compensation expense at the rate of $8,333 per month. At the date of the reverse acquisition, February 1, 2021 these Class I units were cancelled and replaced by a stock option plan of RC-1 shares.
The rights and privileges of the Series A preferred stock are: if the Company ceases to be a reporting entity under the Federal Securities laws, the Series A preferred has the option, as a group, to convert to common shares equal to 66 and 2/3% of the then issued and outstanding common stock.
(9) EQUITY INCENTIVE PLAN
In the first quarter 2021, the Company’s Board of Directors adopted an Equity Incentive Plan. Under this Plan the Company can award Stock Appreciation Rights, (SARs), restricted stock or restricted stock units and incentive stock options and non-qualified stock options to employees or to third parties that provide services to the Company. The Company is limited to issuing a maximum of 15,000,000 shares under this plan.
| 10 |
RC-1 Inc.
(Home Integrator Holdings, LLC, a wholly owned subsidiary)
Notes to Condensed Consolidated Financial Statements
(9) EQUITY INCENTIVE PLAN (continued)
In February 2021, the Company granted an option to replace the Member Unit Grant of HIH that had been extended to a single employee. The option is for 4,210,526 shares of common stock with an exercise price of $0.3563 per share and an expiration of February 1, 2031. These option vest at the rate of 1,052,652 shares on December 1 of 2021, 2022, 2023 and 2024. The Company is amortizing the compensation expense of the grant, $400,000, over the vesting periods, or $8,333 per month.
In March 2021, the Company granted an option to an employee for 2,873,684 shares of common stock with an exercise price of $0.0835 per share and an expiration of February 1, 2031. These options vest at the rate of 718,421 shares on March 15 of 2021, 2022, 2023 and 2024. The Company is amortizing the compensation expense of the grant, $33,047, over the vesting periods, or $688 per month.
(10) RELATED PARTIES
The Company is obligated under a note payable to a related party through its wholly owned subsidiary HIDV in the amount of $95,491. This note does not carry an interest rate is due upon demand.
(11) CONCENTRATIONS OF RISK
The Company maintains its cash in bank deposit accounts, which may, at times, may exceed federally insured limits. The Company had no cash balances in excess of FDIC insured limits at March 31, 2021 or December 31, 2020.
(12) COVID-19 PANDEMIC
The Company’s management is unable to predict the full impact of COVID-19 on the Company.
The corona virus pandemic and subsequent state ordered shut down had an effect upon the Company’s operations. The Company’s access to capital was severely curtailed to totally eliminated, during the pandemic. The Company as yet does not know what the ultimate consequences of the pandemic will be upon its business model.
(13) SUBSEQUENT EVENTS
On May 31, 2021, the Company acquired two entities - Media Design Associates Inc, (MDA), and Booyah Technologies LLC, (BTL).
The Company issued 10,263,288 shares of common stock and a $625,000 promissory note and additional shares of the Company’s common stock in a number equal to 50% of MDA’s 2021 revenue divided by the average closing price of the Company’s common stock for the last 20 trading days of 2021, in exchange for all the issued and outstanding common stock of MDA.
The Company issued 7,244,626 shares of common stock and additional shares of the Company’s common stock in a number equal to 50% of BTL’s 2021 revenue divided by the average closing price of the Company’s common stock for the last 20 trading days of 2021, in exchange for all the issued and outstanding member units of BTL.
| 11 |
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENT NOTICE
This Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate” or “continue” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include:
| · | economic conditions generally and in the targeted industries in which we participate; | |
| · | competition within our targeted industries, including competition from much larger competitors; | |
| · | technological advances; | |
| · | our ability to acquire companies within our targeted industries; | |
| · | our ability to develop and successfully introduce new technologies; and | |
| · | and failure to successfully develop business relationships. |
Overview
This section contains forward-looking statements that involve risks and uncertainties. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date that they are made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
The following discussion should be read in conjunction with the financial statements and notes thereto included herein.
We are a small technology services company that resells and integrates products within the “smart” home and small business markets. These products include network, entertainment, home theater, surveillance and security, access control, shades, lighting and control systems. We deliver our solutions containing some or all of these products in a manner that is custom designed to meet the unique preferences of our customers. The resulting highly personalized automation systems enable our customers to better utilize the power and capabilities of these technologies and realize greater reliability, speed, security, and harmony.
We have previously been engaged in an auto competition and event management business that participated primarily in NASCAR and IMSA sanctioned events, which business has been discontinued.
Jumpstart Our Business Startups Act
In April 2012, the Jumpstart Our Business Startups Act ("JOBS Act") was enacted into law. The JOBS Act provides, among other things:
| · | Exemptions for emerging growth companies from certain financial disclosure and governance requirements for up to five years and provides a new form of financing to small companies; |
| · | Amendments to certain provisions of the federal securities laws to simplify the sale of securities and increase the threshold number of record holders required to trigger the reporting requirements of the Securities Exchange Act of 1934; |
| · | Relaxation of the general solicitation and general advertising prohibition for Rule 506 offerings; |
| · | Adoption of a new exemption for public offerings of securities in amounts not exceeding $50 million; and |
| 12 |
| · | Exemption from registration by a non-reporting company of offers and sales of securities of up to $1,000,000 that comply with rules to be adopted by the SEC pursuant to Section 4(6) of the Securities Act and exemption of such sales from state law registration, documentation or offering requirements. |
In general, under the JOBS Act a company is an emerging growth company if its initial public offering ("IPO") of common equity securities was affected after December 8, 2011 and the company had less than $1 billion of total annual gross revenues during its last completed fiscal year. A company will no longer qualify as an emerging growth company after the earliest of
| (i) | The completion of the fiscal year in which the company has total annual gross revenues of $1 billion or more; |
| (ii) | The completion of the fiscal year of the fifth anniversary of the company's IPO; |
| (iii) | The company's issuance of more than $1 billion in nonconvertible debt in the prior three-year period; or |
| (iv) | The company becoming a "larger accelerated filer" as defined under the Securities Exchange Act of 1934. |
The JOBS Act provides additional new guidelines and exemptions for non-reporting companies and for non-public offerings. Those exemptions that impact the Company are discussed below.
Financial Disclosure. The financial disclosure in a registration statement filed by an emerging growth company pursuant to the Securities Act of 1933 will differ from registration statements filed by other companies as follows:
| (i) | Audited financial statements required for only two fiscal years; |
| (ii) | Selected financial data required for only the fiscal years that were audited; |
| (iii) | Executive compensation only needs to be presented in the limited format now required for smaller reporting companies. (A smaller reporting company is one with a public float of less than $75 million as of the last day of its most recently completed second fiscal quarter) |
However, the requirements for financial disclosure provided by Regulation S-K promulgated by the Rules and Regulations of the SEC already provide certain of these exemptions for smaller reporting companies. The Company is a smaller reporting company. Currently a smaller reporting company is not required to file as part of its registration statement selected financial data and only needs audited financial statements for its two most current fiscal years and no tabular disclosure of contractual obligations.
The JOBS Act also exempts the Company's independent registered public accounting firm from complying with any rules adopted by the Public Company Accounting Oversight Board ("PCAOB") after the date of the JOBS Act's enactment, except as otherwise required by SEC rule.
The JOBS Act also exempts an emerging growth company from any requirement adopted by the PCAOB for mandatory rotation of the Company's accounting firm or for a supplemental auditor report about the audit.
Internal Control Attestation. The JOBS Act also provides an exemption from the requirement of the Company's independent registered public accounting firm to file a report on the Company's internal control over financial reporting, although management of the Company is still required to file its report on the adequacy of the Company's internal control over financial reporting.
Section 102(a) of the JOBS Act exempts emerging growth companies from the requirements in §14A(e) of the Securities Exchange Act of 1934 for companies with a class of securities registered under the 1934 Act to hold shareholder votes for executive compensation and golden parachutes.
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Other Items of the JOBS Act. The JOBS Act also provides that an emerging growth company can communicate with potential investors that are qualified institutional buyers or institutions that are accredited to determine interest in a contemplated offering either prior to or after the date of filing the respective registration statement. The Act also permits research reports by a broker or dealer about an emerging growth company regardless if such report provides sufficient information for an investment decision. In addition, the JOBS Act precludes the SEC and FINRA from adopting certain restrictive rules or regulations regarding brokers, dealers and potential investors, communications with management and distribution of a research reports on the emerging growth company IPO.
Section 106 of the JOBS Act permits emerging growth companies to submit 1933 Act registration statements on a confidential basis provided that the registration statement and all amendments are publicly filed at least 21 days before the issuer conducts any road show. This is intended to allow the emerging growth company to explore the IPO option without disclosing to the market the fact that it is seeking to go public or disclosing the information contained in its registration statement until the company is ready to conduct a roadshow.
Election to Opt Out of Transition Period. Section 102(b) (1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a 1933 Act registration statement declared effective or do not have a class of securities registered under the 1934 Act) are required to comply with the new or revised financial accounting standard.
The JOBS Act provides a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of the transition period and will “opt-in” and make use of the transitional period.
Off-balance sheet arrangements
The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the Company is a party, under which the Company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.
Significant Accounting Policies
Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Note 3 of the Notes to Condensed Consolidated Financial Statements describes the significant accounting policies used in the preparation of the Condensed Consolidated Financial Statements. Certain of these significant accounting policies are considered to be critical accounting policies, as defined below.
A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: 1) we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and 2) different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.
Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the consolidated financial statements as soon as they became known. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our consolidated financial statements are fairly stated in accordance with accounting principles generally accepted in the United States, and present a meaningful presentation of our financial condition and results of operations. We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our consolidated financial statements:
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Use of Estimates – These financial statements have been prepared in accordance with accounting principles generally accepted in the United States and, accordingly, require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Specifically, our management has estimated the expected economic life of our long-lived assets, our net operating loss for tax purposes. Actual results could differ from those estimates.
Cash and Equivalents – We maintain our cash in bank deposit accounts, which at times, may exceed federally insured limits. We have not experienced any losses in such account.
Revenue Recognition – In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, effective for public business entities with annual reporting periods beginning after December 15, 2017. This new revenue recognition standard (new guidance) has a five step process: a) Determine whether a contract exists; b) Identify the performance obligations; c) Determine the transaction price; d) Allocate the transaction price; and e) Recognize revenue when (or as) performance obligations are satisfied. The impact of the Company’s initial application of ASC 606 did not have a material impact on its financial statements and disclosures.
Our principal operations involve the resale of home electronics products and design and installation services relating to these products. Payment is due upon completion, which corresponds to a single performance obligation. Revenue is recognized upon completion of the contracts as the performance obligation is satisfied by transferring control of the goods and services to the customer. Our expenses are recognized in the period the products are delivered and services are provided.
Property and equipment – Property and equipment are recorded at cost and depreciated under the straight-line method over each item's estimated useful life.
Long-Lived Assets – We follow FASB ASC 360-10-35 which has established a "primary asset" approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. During the periods ending March 31, 2021 and December 31, 2020 no impairment losses were recognized.
Stock Based Compensation – We recognize expenses for stock-based compensation arrangements in accordance with provisions of Accounting Standards Codification 718. Accordingly, compensation cost is recognized for the fair value of the instrument issued. For equity instruments issued to non-employees, the estimated fair value of the equity instrument is recorded on the earlier of the performance commitment date or the date the services required are completed.
Plan of Operations
The Company was organized in 2007 as R-Course Promotions, LLC, a California limited liability company, which in 2009 was merged with and into RC-1, Inc., a Nevada corporation (the “Company”). The Company has been engaged since its inception in various aspects of the motorsports industry (the “Motorsports Business”). The Company made a fundamental shift when it consummated a transaction under a Share Exchange Agreement (the “Share Exchange Agreement”) with The Home Integrator Holdings, LLC, a Delaware limited liability company (“Hi Solutions”).
Hi Solutions was formed in January 2020 to deliver technology solutions to the home and small business markets. Our technology solutions enable smarter homes and a smarter work-from-home workforce by connecting and integrating technologies to achieve greater reliability, speed, security, and harmony.
The Company intends to implement its business strategy by:
| · | acquiring independently owned home and small business technology integration companies across the United States (the “Rollup Program”): |
| · | define and implement best practices and core systems to improve their operating performance of our acquired companies and enable them to place greater focus on sales and marketing activities and customer installation and support; |
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| · | drive organic growth through enhanced marketing, new business partnerships, and development and introduction of new services and technologies across our expanding geographic footprint; and |
| · | provide comprehensive training and career development programs and company-wide equity incentives as part of an intense focus on building a distinct company culture. |
We plan to acquire companies in our Rollup Program by issuing shares of our Common Stock in exchange for the equity securities of the owners of the acquired companies. We believe that the issuance of our Common Stock will be attractive to such owners, and that as holders of our Common Stock, these owners, many of whom will also be the senior managers of the acquired companies, will be aligned to continue in the employ of the Company and are incentivized to create additional value for our stockholders.
Effective November 30, 2020, Hi Solutions completed the acquisition of The Home Integrator of the Delaware Valley, LLC (“Hi Delaware Valley”) through a Unit Exchange Agreement dated as of November 30, 2020. Hi Delaware Valley was formed in January 2020 for the express purpose of entering the Target Business Sector before embarking on the planned Rollup Program. Hi Delaware Valley commenced its business in June and is the first acquisition completed in the Rollup Program. The Company’s financial results for the fiscal quarter ended March 31, 2021 are substantially the results of Hi Delaware Valley.
The Company recently acquired the following two additional companies on May 31, 2021:
| · | Media Design Associates, Inc., a Florida corporation based in Ft. Lauderdale, Florida (“MDA”); and |
| · | Booyah Technologies LLC, a Pennsylvania limited liability company based in Huntington Valley, Pennsylvania (“Booyah”). |
The MDA acquisition was consummated pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated as of May 31, 2021 by and among the Company, MDA Acquisition Corporation, a wholly-owned subsidiary of the Company (the “Merger Subsidiary”), MDA and Michael Wohl, a resident of the State of Florida. Pursuant to the terms of the Merger Agreement, the Merger Subsidiary merged with and into MDA (the “Merger”) and Michael Wohl was issued 10,263,288 shares of our Common Stock and a promissory note in the amount of $625,000 (the “Note”). The Note is payable on or prior to August 15, 2021. MDA is now a wholly owned subsidiary of the Company as a result of this merger. The shares of our Common Stock issued to Michael Wohl were valued at a negotiated price of $0.2436 per share.
In addition to the shares of Common Stock issued in the Merger, Michael Wohl is eligible to be issued additional shares of Common Stock under the terms of the Merger Agreement equal to fifty percent (50%) of the revenues generated by MDA during the fiscal year ending December 31, 2021. Any such shares of Common Stock will be issued at a value equal to the average closing price of the Common Stock on the last twenty days of trading in 2021.
The Booyah acquisition was consummated pursuant to a Membership Interest Purchase Agreement (the “Purchase Agreement”) dated as of May 31, 2021 by and among the Company, Booyah and Ben Marlow, a resident of the Commonwealth of Pennsylvania. Pursuant to the terms of the Purchase Agreement, the Company issued 7,244,626 shares of our Common Stock to Ben Marlow in exchange for all of the outstanding membership interests of Booyah (the “Exchange”). Booyah is now a wholly owned subsidiary of the Company as a result of this exchange. The shares of our Common Stock issued to Ben Marlow were valued at a negotiated price of $0.2436 per share.
In addition to the shares of Common Stock issued in the Exchange, Ben Marlow is eligible to be issued additional shares of Common Stock under the terms of the Purchase Agreement equal to fifty percent (50%) of the revenues generated by Booyah during the fiscal year ending December 31, 2021. Any such shares of Common Stock will be issued at a value equal to the average closing price of the Common Stock on the last twenty days of trading in 2021.
Going Concern
As of March 31, 2021, the Company had an accumulated deficit of approximately $460,000 and negative operating cash flow of approximately $326,000. These factors, together with our historical operating losses raise substantial doubt about our ability to continue as a going concern.
The Company believes it will be able to raise sufficient capital over the next twelve months to finance operations. The Company expects to raise up to $500,000 in capital through the issuance of convertible debt prior to June 30, 2021 and up to additional $4.5 million from the sale of Common Stock prior to September 30, 2021. In addition, the Company expects to generate net positive income and cash flows from the companies it acquires in its Rollup Program. However, there can be no assurances that the Company will be successful in raising this amount of capital or achieving positive cash flow from its operating losses to provide to eliminate its operating losses. The accompanying financial statements do not contain any adjustments which may be required as a result of this uncertainty.
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The Company capital requirements consist of general working capital needs. The Company estimates that the cost of operating its business through September 30, 2021 will require additional capital of a minimum of $2,000,000 to fund an estimated:
| · | $625,000 to retire the principal balance of the Note due to Michael Wohl | |
| · | $500,000 in compensation paid to corporate personnel, including accounting consultants; | |
| · | $200,000 to retire short-term debt, accounts payable and accrued expenses; | |
| · | $250,000 investment in our operating businesses to fund a variety of growth initiatives; | |
| · | $90,000 in technology development; | |
| · | $60,000 for marketing and branding; | |
| · | $60,000 for accounting expenses; | |
| · | $30,000 for legal expenses; | |
| · | $12,000 in office expenses; and | |
| · | the balance in miscellaneous licensing and other fees and expenses. |
At March 31, 2021, the Company had cash of approximately $241,800.
Result of Operations
Three Months Ended March 31, 2021
The Company’s business was commenced in the second quarter of 2020. As a result, the Company does not have a same prior year period with which to compare current year operating results.
Revenues
The Company recognized $61,854 in revenues, all generated by our Hi Delaware Valley subsidiary The Hi Delaware Valley revenue consisted of $37,120 from the re-sale of product and $24,734 from the provision of services.
Operating Expenses
For the three months ended March 31, 2021, operating expenses were a total of $319,000.
Net Loss
The Company incurred a net loss of $290,700 in the three months ended March 31, 2021.
LIQUIDITY AND CAPITAL RESOURCES
The Company had approximately $241,800 in cash at March 31, 2021, an accumulated deficit of approximately $460,000 and negative operating cash flow of approximately $326,000. These factors, together with our historical operating losses raise substantial doubt about our ability to continue as a going concern.
Cash Flows for the Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020.
Operating activities
During the three months ended March 31, 2021, we used $326,000 in cash from operating activities compared to $0 in cash provided during the same prior year period, an increase of $326,000. The increase was due to the net loss in the current quarter and from an increase in inventory and decrease in liabilities.
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Financing activities
We were provided $546,500 in cash in financing activities during the three months ended March 31, 2021 compared to $0 during the same prior year period, due to the private placement of $550,000 of equity securities completed by Hi Solutions in January 2021, reduced by payments on a vehicle loan.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk.
As a “smaller reporting company,” we are not required to provide the information under this Item 3.
ITEM 4. Controls and Procedures
Evaluation of disclosure controls and procedures
Based upon an evaluation of the effectiveness of our disclosure controls and procedures performed by our Chief Executive Officer as of the end of the period covered by this report, our Chief Executive Officer concluded that our disclosure controls and procedures have not been effective as a result of a weakness in the design of internal control over financial reporting identified below.
As used herein, “disclosure controls and procedures” mean controls and other procedures of our company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
This quarterly report does not include an attestation report of our registered independent public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered independent public accounting firm.
Changes in Internal Control Over Financial Reporting
No changes in our internal control over financial reporting occurred during the three months ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or material pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
Pursuant to the terms of the Share Exchange Agreement, the Company issued up to 85,789,474 shares of Common Stock in exchange for 100% of the membership interests of Hi Solutions.
These securities were not registered under the Securities Act of 1933, as amended (the “Securities Act”), but qualified for exemption under Section 4(2) of the Securities Act. The securities were exempt from registration under Section 4(2) of the Securities Act because the issuance of such securities by the Company did not involve a “public offering,” as defined in Section 4(2) of the Securities Act, due to the insubstantial number of persons involved in the transaction, size of the offering, manner of the offering and number of securities offered. The Company did not undertake an offering in which it sold a high number of securities to a high number of investors. In addition, these shareholders had the necessary investment intent as required by Section 4(2) of the Securities Act since they agreed to, and received, share certificates bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act.
ITEM 3. Default Upon Senior Securities
During the three months ended March 31, 2021, the Company had no senior securities issued and outstanding.
ITEM 4. Mine Safety Disclosures
Not applicable.
Subsequent Events
The Company consummated two acquisitions on May 31, 2021.
The Company acquired all of the outstanding capital stock of Media Design Associates, Inc., a Florida corporation based in Ft. Lauderdale, Florida (“MDA”). This acquisition was consummated pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated as of May 31, 2021 by and among the Company, MDA Acquisition Corporation, a wholly-owned subsidiary of the Company (the “Merger Subsidiary”), MDA and Michael Wohl, a resident of the State of Florida. Pursuant to the terms of the Merger Agreement, the Merger Subsidiary merged with and into MDA (the “Merger”) and Michael Wohl was issued 10,263,288 shares of our Common Stock and a promissory note in the amount of $625,000 (the “Note”). The Note is payable on or prior to August 15, 2021. MDA is now a wholly owned subsidiary of the Company as a result of this merger. The shares of our Common Stock issued to Michael Wohl were valued at a negotiated price of $0.2436 per share.
In addition to the shares of Common Stock issued in the Merger, Michael Wohl is eligible to be issued additional shares of Common Stock under the terms of the Merger Agreement equal to fifty percent (50%) of the revenues generated by MDA during the fiscal year ending December 31, 2021. Any such shares of Common Stock will be issued at a value equal to the average closing price of the Common Stock on the last twenty days of trading in 2021.
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The Company acquired all of the outstanding membership interests of Booyah Technologies LLC, a Pennsylvania limited liability company based in Huntington Valley, Pennsylvania (“Booyah”). This acquisition was consummated pursuant to a Membership Interest Purchase Agreement (the “Purchase Agreement”) dated as of May 31, 2021 by and among the Company, Booyah and Ben Marlow, a resident of the Commonwealth of Pennsylvania. Pursuant to the terms of the Purchase Agreement, the Company issued 7,244,626 shares of our Common Stock to Ben Marlow in exchange for all of the outstanding membership interests of Booyah (the “Exchange”). Booyah is now a wholly owned subsidiary of the Company as a result of this exchange. The shares of our Common Stock issued to Ben Marlow were valued at a negotiated price of $0.2436 per share.
In addition to the shares of Common Stock issued in the Exchange, Ben Marlow is eligible to be issued additional shares of Common Stock under the terms of the Purchase Agreement equal to fifty percent (50%) of the revenues generated by Booyah during the fiscal year ending December 31, 2021. Any such shares of Common Stock will be issued at a value equal to the average closing price of the Common Stock on the last twenty days of trading in 2021.
Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K
* Filed herewith.
** To be filed by amendment
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In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
RC-1, Inc.
June 4, 2021
By: /s/ John E. Parker
John E. Parker
Chief Executive Officer
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