ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR RESULTS OF
OPERATIONS.
The
discussion and financial statements contained herein are for the six and three
months ended June 30, 2009 and June 30, 2008. Please refer to the Form 10-K
filed with the SEC on April 15, 2009, which included the Company’s audited
consolidated financial statements as of December 31, 2008 and 2007.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This
report contains forward-looking statements that involve risks and uncertainties.
We generally use words such as “believe,” “may,” “could,” “will,” “intend,”
“expect,” “anticipate,” “plan,” and similar expressions to identify
forward-looking statements, including statements regarding our ability to
continue to create innovative technology products, our ability to continue to
generate new business based on our sales and marketing efforts, referrals and
existing relationships, our financing strategy and ability to access the
capital markets and other risks discussed in our Risk Factor section included
in our Form 10-K for the year ended December 31, 2008, as filed with the
Securities and Exchange Commission April 15, 2009. Although we believe the
expectations expressed in the forward-looking statements included in this Form
10-Q are based on reasonable assumptions within the bounds of our knowledge of
our business, a number of factors could cause our actual results to differ
materially from those expressed in any forward-looking statements. We cannot
assure you that the results or developments expected or anticipated by us will
be realized or, even if substantially realized, that those results or
developments will result in the expected consequences for us or affect us, our
business or our operations in the way we expect. We caution readers not to
place undue reliance on these forward-looking statements, which speak only as
of their dates. We do not intend to update any of the forward-looking
statements after the date of this document to conform these statements to
actual results or to changes in our expectations, except as required by law.
Company Overview
Currently, we are a
non-operating shell corporation. We intend to effect a merger, acquisition or
other business combination with an operating company by using a combination of
capital stock, cash on hand, or other funding sources, if available. We intend
to devote substantially all of our time to identifying potential merger or
acquisition candidates. There can be no assurances that we will enter into such
a transaction in the near future or on favorable terms, or that other funding
sources will be available. A more detailed discussion of the current business
plan is set forth below.
Plan of Business
History
Darwin
Resources, Inc. (the “Company”) was originally incorporated on June 24, 1993 in
the State of Florida as Vitech America, Inc. On September 28, 2007, Darwin
Resources, Inc., merged with Vitech America, Inc., so as to effect a redomicile
to Delaware and a name change. Darwin Resources, Inc., was incorporated in
Delaware for the purpose of merging with Vitech America, Inc.
The Company was originally
engaged as a manufacturer and distributor of computer equipment and related
markets in Brazil. The Company evolved into a vertically integrated
manufacturer and integrator of complete computer systems and business network
systems selling directly to end-users. A diversified customer base widely
distributed throughout Brazil was developed. In September of 1996, the Company
had over 8,000 customers and established a clearly defined channel for
marketing additional hardware products, such as updated peripheral products,
new computers, new network products as well as services, such as internet
access services. The Company marketed its products throughout Brazil under the
trademarks EasyNet, MultiShow, and Vitech Vision.
On August 17, 2001, the
Company filed a voluntary Chapter 7 petition under the U.S. Bankruptcy Code in
the U.S. Bankruptcy Court for the Southern District of Florida (case no.
01-18857). As a result of the filing, all of the Company’s properties were
transferred to a United States Trustee and the Company terminated all of its
business operations. The Bankruptcy Trustee has disposed of all of the assets.
On March 14, 2007, the Chapter 7 bankruptcy was closed by the U.S. Bankruptcy
Court Southern District of Florida.
On June 21, 2007, pursuant
to its Order Granting the “plaintiff’s motion for acceptance of receiver’s
report and release of receiver” (the “Order”) and to close the case, Brian
Goldenberg as receiver of the Company pursuant to Florida Statue 607, the
Eleventh Judicial Circuit, In and For Miami-Dade County, Florida was released
as receiver of the Company. The purpose of appointing the receiver was to
determine if the Company could be reactivated and
13
operated in such a manner so
that the Company can be productive and successful. Pursuant to Section 607.1432
of the Florida Statutes, alternative remedies to dissolution and liquidation
would be determined as to whether the Company could be saved. The actions of
the receivership include:
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To settle the affairs,
collect the outstanding debts, sell and convey the property, real and
personal
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To demand, sue for,
collect, receive and take into his or their possession all the goods and
chattels, rights and credits, moneys and effects, lands and tenements, books,
papers, choices in action, bills, notes and property, of every description of
the Company.
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To institute suits at law
or in equity for the recovery of any estate, property, damages or demands
existing in favor of the Company.
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Provided that the
authority of the receivership is to continue the business of the Company and
not to liquidate its affairs or distribute its assets
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To exercise the rights and
authority of a Board of Directors and Officers in accordance with state law,
the articles and bylaws
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In accordance with the
Order, Mr. Goldenberg appointed Mark Rentschler as sole interim Director and
President.
In September 2007, the
Company changed its name to Darwin Resources, Inc. The Company raised operating
capital through the sale of equity securities, which the Company used to
recruit and organize management, and to finance the initial costs associated
with corporate strategic planning and development.
Change of Control
On May 15, 2007, Mark Rentschler
contributed an estimated $50,000 as paid in capital to the Company. The Company
is to use these funds to pay the costs and expenses necessary to revive the
registrant’s business operations. Such expenses include, without limitation,
fees to reinstate the Company’s corporate charter with the State of Florida;
payment of all past due franchise taxes; settling all past due accounts with
the registrant’s transfer agent; accounting and legal fees; and costs
associated with bringing the registrant current with its filings with the
Securities and Exchange Commission, etc.
On June 28, 2007, in
consideration for the capital contribution by Mark Rentschler, the Company
issued Downing Street Corp., 5,000,000 shares of its newly created Series B
Preferred Stock, which represented approximately 19.58% of the total ownership
of the Company as of June 6, 2008 in accordance with the Order. The preferred
stock carried voting rights which effectively made Downing Street Corp., the
holder of approximately 99% of the voting rights in the Company’s outstanding
common and preferred stock. The voting rights also provided that in no event
will the preferred stock voting rights consist of less than 51% of the total
voting rights in the Company’s outstanding common and preferred stock.
Downing Street Corp.,
(“DSC”) is a business consulting firm, for the purpose of advising the company
as to potential business combinations. Mr. Rentschler is the managing director
of DSC.
Accordingly, DSC is an
affiliated entity.
On September 28, 2007,
Darwin Resources Inc. was incorporated in Delaware for the purpose of merging
with Vitech America, Inc., a Florida Corporation, so as to effect a re-domicile
to Delaware. The Delaware Corporation is authorized to issue 500,000,000 shares
of $0.000001 par value common stock and 8,000,000 shares of $0.000001 par value
preferred stock. On September 28, 2007, both Vitech America, the Florida
corporation and Darwin Resources, the Delaware corporation, signed and filed
Articles of Merger, with the respective states, pursuant to which the Delaware
corporation, Darwin Resources, was the surviving entity. The shareholders of
record of Vitech America, Inc. received 1 share of new common stock for every 1
share of Vitech America common stock and 1 share for every 1 share of preferred
stock they owned.
On September 28, 2007, the
Company changed its name to Darwin Resources Inc. The name was not meant to be
indicative of the Company’s business plan or purpose. As more fully described
herein under the heading “Current Business Plan”, Darwin Resources’ current
business plan is to seek, investigate and, if such investigation warrants,
14
acquire an interest in
business opportunities presented to it by persons or firms who or which desire
to seek the perceived advantages of an Exchange Act registered corporation.
On June 30, 2008, the
Company’s trading symbol was changed to “DRWN.PK.”
On or about November 14,
2008, our registrations statement filed with the SEC on Form 10 became
effective. Accordingly, we resumed the filing of reporting documentation in an
effort to maximize shareholder value. Our best use and primary attraction as a
merger partner or acquisition vehicle is our status as a reporting public
company. Any business combination or transaction may potentially result in
significant issuance of shares and substantial dilution to our stockholders.
As of June 9, 2009, the
Company is not in negotiations with, nor does it have any agreements with any
potential merger candidates.
Current Business Plan
We are a shell company in
that we conduct nominal operations and have nominal assets. At this time, our
purpose is to seek, investigate and, if such investigation warrants, acquire an
interest in business opportunities presented to us by persons or firms who or
which desire the perceived advantages of an Exchange Act registered
corporation. We will not restrict our search to any specific business,
industry, or geographical location and we may participate in a business venture
of virtually any kind or nature. This discussion of the proposed business is
purposefully general and is not meant to be restrictive of our virtually
unlimited discretion to search for and enter into potential business
opportunities. We anticipate that we may be able to participate in only one
potential business venture because we have nominal assets and limited financial
resources. This lack of diversification should be considered a substantial risk
to our shareholders because it will not permit us to offset potential losses
from one venture against gains from another.
We may seek a business
opportunity with entities which have recently commenced operations, or which
wish to utilize the public marketplace in order to raise additional capital in
order to expand into new products or markets, to develop a new product or
service, or for other corporate purposes. We may acquire assets and establish
wholly owned subsidiaries in various businesses or acquire existing businesses
as subsidiaries.
We intend to promote
ourselves privately. We have not yet prepared any notices or advertisement. We
anticipate that the selection of a business opportunity in which to participate
will be complex and extremely risky. Due to general economic conditions, rapid
technological advances being made in some industries and shortages of available
capital, management believes that there are numerous firms seeking the
perceived benefits of a publicly registered corporation. Such perceived
benefits may include facilitating or improving the terms on which additional
equity financing may be sought, providing liquidity for incentive stock options
or similar benefits to key employees, providing liquidity (subject to
restrictions of applicable statutes), for all shareholders and other factors.
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.
We will continue to have,
little or no capital with which to provide the owners of business opportunities
with any significant cash or other assets. However, we believe that we will be
able to offer owners of acquisition candidates the opportunity to acquire a
controlling ownership interest in a publicly registered company without
incurring the cost and time required to conduct an initial public offering. The
owners of the business opportunities will, however, incur significant legal and
accounting costs in connection with acquisition of a business opportunity,
including the costs of preparing Form 8K’s, 10K’s, 10Q’s, agreements and
related reports and documents. The Securities Exchange Act of 1934 (the
“Exchange Act”), specifically requires that any merger or acquisition candidate
comply with all applicable reporting requirements, which include providing
audited financial statements to be included within the numerous filings
relevant to complying with the Exchange Act.
The analysis of new business
opportunities will be undertaken by, or under the supervision of, our officers
and directors. We intend to concentrate on identifying preliminary prospective
business opportunities, which may be brought to its attention through present
associations of our officers and directors. In analyzing prospective business
opportunities, we will consider such matters as the available technical,
financial and managerial resources; working capital and other financial
requirements; history of operations, if any; prospects for the future; nature
of present and
15
expected competition; the
quality and experience of management services which may be available and the
depth of that management; the potential for further research, development, or
exploration; specific risk factors not now foreseeable but which then may be
anticipated to impact our proposed activities; the potential for growth or
expansion; the potential for profit; the perceived public recognition of
acceptance of products, services, or trades; name identification; and other
relevant factors. Our officers and directors expect to meet personally with
management and key personnel of the business opportunity as part of their
investigation. To the extent possible, we intend to utilize written reports and
investigation to evaluate the above factors.
Our officers have limited
experience in managing companies similar to the Company and shall rely upon
their own efforts, in accomplishing our business purpose. We may from time to
time utilize outside consultants or advisors to effectuate its business
purposes described herein. No policies have been adopted regarding use of such
consultants or advisors, the criteria to be used in selecting such consultants
or advisors, the services to be provided, the term of service, or regarding the
total amount of fees that may be paid. However, because of our limited
resources, it is likely that any such fee would be paid in stock and not in
cash.
We will not restrict its
search for any specific kind of firms, but may acquire a venture that is in its
preliminary or development stage, which is already in operation, or in
essentially any stage of its corporate life. It is impossible to predict at
this time the status of any business in which we may become engaged, in that
such business may need to seek additional capital, may desire to have its
shares publicly traded, or may seek other perceived advantages which we may
offer. However, we do not intend to obtain funds in one or more private
placements to finance the operation of any acquired business opportunity until
such time as we have successfully consummated such a merger or acquisition.
Acquisition of Opportunities
In implementing a structure
for a particular business acquisition, we may become a party to a merger,
consolidation, reorganization, joint venture, or licensing agreement with another
corporation or entity. We may also acquire stock or assets of an existing
business. On the consummation of a transaction, it is probable that the present
management and our shareholders will no longer control us. Furthermore, our
directors may, as part of the terms of the acquisition transaction, resign and
be replaced by new directors without a vote of our shareholders.
It is anticipated that any
securities issued in any such reorganization would be issued in reliance upon
exemption from registration under applicable federal and state securities laws.
In some circumstances, however, as a negotiated element of a transaction, we
may agree to register all or a part of such securities immediately after the
transaction is consummated or at specified times thereafter.
As part of our
investigation, our officers and directors may personally meet with management
and key personnel, may visit and inspect material facilities, obtain analysis
and verification of certain information provided, check references of
management and key personnel, and take other reasonable investigative measures.
The manner in which we participate in an opportunity will depend on the nature
of the opportunity, our respective needs and desires, the management of the
opportunity and the relative negotiation strength.
With respect to any merger
or acquisition, negotiations with target company management are expected to
focus on the percentage of the Company which the target company shareholders
would acquire in exchange for all of their shareholdings in the target company.
Depending upon, among other things, the target company’s assets and
liabilities, our shareholders will in all likelihood hold a substantially
lesser percentage ownership interest in the Company following any merger or acquisition.
The percentage ownership may be subject to significant reduction in the event
we acquire a target company with substantial assets. Any merger or acquisition
can be expected to have a significant dilutive effect on the percentage of
shares held by our then shareholders.
We will participate in a
business opportunity only after the negotiation and execution of appropriate
written agreements. Although the terms of such agreements cannot be predicted,
generally such agreements will require some specific representations and
warranties by all of the parties thereto, will specify certain events of
default, will detail the terms of closing and the conditions which must be
satisfied by each of the parties prior to and after such closing, will outline
the manner of bearing costs, including costs associated with our attorneys and
accountants, will set forth remedies on default and will include miscellaneous
other terms.
16
Competition
We will remain an
insignificant participant among the firms which engage in the acquisition of
business opportunities. There are many established venture capital and
financial concerns which have significantly greater financial and personnel
resources and technical expertise. In view of our combined extremely limited
financial resources and limited management availability, we will continue to be
at a significant competitive disadvantage compared to our competitors.
Employees
We have no employees. Our
business will be managed by our officer and directors, who may become employees.
We do not anticipate a need to engage any fulltime employees at this time. The
need for employees and their availability will be addressed in connection with
our proposed operations.
Results of Operations for the Three Months Ended June 30,
2009 and 2008
Revenues
Revenues were $0 for the
three months ended June 30, 2009 and June 30, 2008.
Operating Expenses
Operating expenses for the
three months ended June 30, 2009 were $24,754 compared to $18,643 for the three
months ended June 30, 2008. Operating expenses were comparable and included
board compensation and consulting fees, among other expenses. The lack of
significant expenses during each period is attributed to the lack of
negotiations and activity related to prospective merger or acquisition candidates.
Loss From Operations
Loss from operations for the
three months ended June 30, 2009 was $25,817 as compared to $18,643 for the
three months ended June 30, 2008. The increase in net loss is directly
attributable to the increase in operating expenses described above.
Results of Operations for the Six Months Ended June 30, 2009
and 2008
Revenues
Revenues were
$0 for the six months ended June 30, 2009 and June 30, 2008.
Operating Expenses
Operating
expenses for the six months ended June 30, 2009 were $43,716 compared to
$35,700 for the six months ended June 30, 2008. Operating expenses were
comparable and included board compensation and consulting fees, among other
expenses. The lack of significant expenses during each period is attributed to
the lack of negotiations and activity related to prospective merger or
acquisition candidates.
Loss From Operations
Loss from
operations for the six months ended June 30, 2009 was $45,697 as compared to
$35,700 for the six months ended June 30, 2008. The increase in net loss is
directly attributable to the increase in operating expenses described above.
LIQUIDITY AND CAPITAL RESOURCES
We currently plan to satisfy
the Company’s cash requirements for the next 12 months by borrowing from
affiliated companies with common ownership or control or directly from our
officers and directors and we believe we can satisfy the Company’s cash
requirements so long as it is able to obtain financing from these affiliated
companies. We currently expect that money borrowed will be used during the next
12 months to satisfy our operating costs, professional fees and for general
corporate purposes. We have also been exploring alternative financing sources.
17
We will use
our limited personnel and financial resources in connection with seeking new
business opportunities, including seeking an acquisition or merger with an
operating company. It may be expected that entering into a new business
opportunity or business combination will involve the issuance of a
substantial number of restricted shares of common stock. If such additional
restricted shares of common stock are issued, our shareholders will
experience a dilution in their ownership interest. If a substantial number
of restricted shares are issued in connection with a business combination,
a change in control may be expected to occur.
As of June 30,
2009, the Company had current assets consisting of cash and cash equivalents in
the amount of $132. As of June 30, 2009, the Company had current
liabilities consisting of related party payables and accrued expenses of
$85,738 and $90,477, respectively.
In connection
with the plan to seek new business opportunities and/or effecting a business
combination, we may determine to seek to raise funds from the sale of
restricted stock or debt securities. We have no agreements to issue any debt or
equity securities and cannot predict whether equity or debt financing will
become available at acceptable terms, if at all.
There are no
limitations in our certificate of incorporation restricting our ability to
borrow funds or raise funds through the issuance of restricted common
stock to effect a business combination. Our limited resources and lack of
recent operating history may make it difficult to borrow funds or raise
capital. Such inability to borrow funds or raise funds through the issuance of
restricted common stock required to effect or facilitate a business
combination may have a material adverse effect on our financial condition and
future prospects, including the ability to complete a business
combination. To the extent that debt financing ultimately proves to
be available, any borrowing will subject us to various risks traditionally
associated with indebtedness, including the risks of interest
rate fluctuations and insufficiency of cash flow to pay principal and
interest, including debt of an acquired business.
MATERIAL TRENDS AND UNCERTAINTIES
We are a shell company. Should our cash flow shortfalls continue, and
should we be unsuccessful in raising capital, it will have an adverse impact on
our business, which in turn will have an adverse impact on our financial
condition and results of operations. While we are actively assessing our cash
flow needs and pursuing multiple avenues of financing and cash flow generation,
there can be no assurance that our activities will be successful. If our
fundraising efforts are not successful, it is likely that we will not be able
to meet our obligations as they come due.
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TEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required
for smaller reporting companies.
I
TEM 4T. CONTROLS AND
PROCEDURES
a)
Evaluation of Disclosure
Controls.
Our Chief Executive Officer and Chief Financial
Officer evaluated the effectiveness of our disclosure controls and procedures
as of the end of our fiscal quarter ended June 30, 2009 pursuant to Rule
13a-15(b) of the Securities and Exchange Act. Disclosure controls and
procedures are controls and other procedures that are designed to ensure that
information required to be disclosed by us 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 SEC’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 under the Exchange Act is accumulated and communicated to
our management, as appropriate to allow timely decisions regarding required
disclosure. Based on his evaluation, the CEO concluded that our disclosure
controls and procedures were not effective to ensure that information required
to be disclosed by us in the reports 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 based on the
material weakness described below:
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1.
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Management’s conclusion is based on, among other things, the audit
adjustments recorded for fiscal years 2008 and 2007, and for the lack of
segregation of duties and responsibilities within the Company.
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It should be noted that any system of controls, however well designed
and operated, can provide only reasonable, and not absolute, assurance that the
objectives of the system are met. In addition, the design of any control system
is based in part upon certain assumptions about the likelihood of future
events. Because of these and other inherent
18
limitations of control systems,
there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions.
(b)
Changes in internal control over
financial reporting.
In order to rectify our ineffective disclosure
controls and procedures, we are developing a plan to ensure that all
information will be recorded, processed, summarized and reported accurately,
and as of the date of this report, we have taken the following steps to address
the above-referenced material weaknesses in our internal control over financial
reporting:
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1.
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We will continue to educate our management personnel to comply with
the disclosure requirements of Securities Exchange Act of 1934 and Regulation
S-K; and
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2.
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We will increase management oversight of accounting and reporting
functions in the future.
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P
ART II — OTHER INFORMATION
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TEM 1. LEGAL PROCEEDINGS.
We may be
involved in litigation, negotiation and settlement matters that may occur in
our day-to-day operations. Management does not believe the implication of this
type of litigation will have a material impact on our financial statements.
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TEM 1A. RISK FACTORS
Not required
for smaller reporting companies.
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TEM 2. UNREGISTERED SALES
OF EQUITY SECURITIES AND USE OF PROCEEDS.
NONE.
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TEM 3. DEFAULTS UPON SENIOR
SECURITIES.
NONE.
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TEM 4. SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS.
NONE.
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TEM 5. OTHER INFORMATION.
NONE.
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TEM 6. EXHIBITS.
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Exhibits.
No.
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Description
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31.1
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Certification
Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed
herewith.
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32.1
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Certification
of Officers pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
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SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
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DARWIN RESOURCES, INC.
(Registrant)
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Date: August
14, 2009
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By:
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/s/ Mark Rentschler
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Mark
Rentschler
Chief Executive Officer,
Principle Accounting Officer
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