REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
SMSA Crane Acquisition Corp.
Orinda, California
Opinion on the Financial Statements
We have audited the accompanying balance sheets of SMSA Crane Acquisition Corp. (the Company) as of December 31, 2018 and 2017, and the related statements of operations, stockholders equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Consideration of the Companys Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses and has no operations which raise substantial doubt about its ability to continue as a going concern. Managements plans in regard to these matters are described in Note C. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Pinnacle Accountancy Group of Utah
We have served as the Companys auditor since 2016.
Pinnacle Accountancy Group of Utah
a dba of Heaton & Company, PLLC
Farmington, Utah
May 1, 2020
F-1
Notes to Financial Statements
December 31, 2018 and 2017
Note A - Basis of presentation, Background and Description of Business
Background and Description of Business
SMSA Crane Acquisition Corp. was organized on September 9, 2009 as a Nevada corporation to effect the reincorporation of Senior Management Services of Crane, Inc., a Texas corporation.
The Company's business plan is now to pursue a business combination through the acquisition of, or merger with, an existing company seeking the perceived advantages of being a publicly traded corporation. The Company is not restricting its potential target companies to any specific business, industry or geographical location. No assurances can be given that the Company will be successful in locating or negotiating with any target company.
Note B - Change of Control
Coqui, the principal shareholder of the Company, entered into a Stock Purchase Agreement, effective as of the 26th day of June, 2017, with Irwin Eskanos (Buyer). Coqui agreed to sell to the Buyer, and the Buyer agreed to purchase from Coqui, a total of 9,947,490 shares of common stock of the Company for a total purchase price of $250,000. These purchased shares represented approximately 99% of the Companys issued and outstanding shares of Common Stock. Concurrent with the sale of controlling interest, Coqui (Indemnitor) entered into an Indemnity Agreement with SMSA Crane Acquisition Corp (indemnitee). Coqui agreed to paid $133,572 of the Companys outstanding debts at or prior to the closing of Stock Sale. The Company recorded Coquis forgiveness of debt of $133,572 under Additional paid in capital, for the year ended December 31, 2017.
On June 26, 2017, the board of directors appointed Irwin Eskanos as our new sole Director, President, Secretary, Treasurer, CEO, and CFO. Following these appointments, the board accepted the resignation of Carmen I. Bigles as our former sole officer and director.
Note C Going Concern
We have incurred recurring losses since inception and expect to continue to incur losses as a result of legal and professional fees and our corporate general and administrative expenses. Our net losses incurred for the years ended December 31, 2018 and 2017, amounted to approximately $38,237 and $73,662 respectively, and working capital (deficits) for the years ended December 31, 2018 and 2017 were approximately $65,480 and $27,243, respectively. As a result, there is substantial doubt about our ability to continue as a going concern. In the event that we are unable to generate sufficient cash from our operating activities or raise additional funds, we may be required to delay, reduce or severely curtail our operations or otherwise impede our on-going business efforts, which could have a material adverse effect on our business, operating results, financial condition and long-term prospects. The Company expects to seek to obtain additional funding through future equity issuances. There can be no assurance as to the availability or terms upon which such financing and capital might be available.
Note D - Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the valuation of deferred tax assets. Actual results could differ from those estimates.
Cash and cash equivalents
The Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.
F-6
Income taxes
The Company files income tax returns in the United States of America and various states, as appropriate and applicable.
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740 Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
The Company has adopted the provisions of ASC 740-10 "Accounting for Uncertain Income Tax Positions." The Codification Topic requires the recognition of potential liabilities as a result of management's acceptance of potentially uncertain positions for income tax treatment on a "more-likely-than-not" probability of an assessment upon examination by a respective taxing authority. As a result of the implementation of Codification's Income Tax Topic, the Company did not incur any liability for unrecognized tax benefits.
Income (Loss) per share
Basic earnings (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the respective period presented in our accompanying financial statements.
Fully diluted earnings (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of common stock equivalents.
Common stock equivalents represent the dilutive effect of the assumed exercise of outstanding stock warrants, options or convertible securities, using the if-converted method, and only if the common stock equivalents are considered dilutive based upon the Company's net income (loss) position.
As of December 31, 2018 and December 31, 2017, the Company had no outstanding stock warrants, options or convertible securities which could be considered dilutive for purposes of the loss per share calculation.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
Note E - Fair Value of Financial Instruments and Fair Value Measurements
The carrying amount of cash, accounts payable and accrued expenses and due to shareholder, approximates fair value due to the short term nature of these items and/or the current interest rates payable in relation to current market conditions.
ASC Topic 820, "Fair Value Measurements and Disclosures," requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, "Financial Instruments," defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
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·
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Level 1:
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Observable inputs such as quoted prices in active markets;
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·
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Level 2:
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Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
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·
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Level 3:
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Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
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F-7
Note F - Related Party Transactions
Due to Shareholder
As of December 31, 2018 and 2017, the Company owes $46,615 and $39,115, respectively, to Mr. Irwin Eskanos, the principal shareholder of the Company, for the funding of its current operating expenses. The amount owing is unsecured, non-interest bearing, and due on demand. During the years ended December 31, 2018 and 2017, Mr. Eskanos advanced $7,500 and $39,115, respectively.
As of December 31, 2017, the Company made a repayment of $5,405 to a related party, and the Company advanced $1,524 from a former shareholder.
Forgiveness of Debt
During the year ended December 31, 2017, the Companys former shareholder agreed to forgive $133,572 of debt.
Note G - Concentration of Credit Risk
At times cash deposited with financial institutions may exceed federally insured limits. The Company has not experienced any losses in such accounts through December 31, 2018.
Note H - Contingencies
The Company was contemplating a possible merger by the Company and Coquí. The Company's business plan is now to pursue a business combination through the acquisition of, or merger with, an existing company seeking the perceived advantages of being a publicly traded corporation. No assurances can be given that the Company will be successful in pursuing a business combination in the near future or at all.
Note I - Income Taxes
As of December 31, 2018 and 2017, the Company has a net operating loss carryforward of approximately $417,000 and $379,000, respectively, to offset future taxable income. The amount and availability of any net operating loss carryforwards will be subject to the limitations set forth in the Internal Revenue Code. Such factors as the number of shares ultimately issued within a three year look-back period; whether there is a deemed more than a 50 percent change in control; the applicable long-term tax exempt bond rate; continuity of historical business; and subsequent income of the Company all enter into the annual computation of allowable annual utilization of any net operating loss carryforward(s).
The Company's income tax expense (benefit) for each of the year ended December 31, 2018 and 2017 is 21%:
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Year Ended
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December 31,
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2018
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2017
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Statutory rate applied to income before income taxes
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$
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(8,100
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)
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$
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(25,000
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)
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Effects of rate changes on deferred tax assets and valuation allowance
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49,400
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Change in valuation allowance
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8,100
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(24,400
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)
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Income tax expense
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$
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$
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The Company's only temporary difference due to statutory requirements in the recognition of assets and liabilities for tax and financial reporting purposes, as of December 31, 2018 and December 31, 2017, respectively, relate solely to the Company's net operating loss carryforward(s). This difference gives rise to the financial statement carrying amounts and tax bases of assets and liabilities causing either deferred tax assets or liabilities, as necessary, as of December 31, 2018 and December 31, 2017, respectively:
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December 31,
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2018
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2017
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Deferred tax assets 21% (2018 and 2017)
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Net operating loss carryforwards
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$
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87,700
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$
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79,600
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Less valuation allowance
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(87,700
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)
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(79,600
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)
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Net Deferred Tax Asset
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$
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$
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F-8
During the each of the years ended December 31, 2018 and 2017, respectively, the valuation allowance for the deferred tax asset increased (decreased) by approximately $8,100 and ($24,400), respectively. Open tax years that are subject to IRS examination start from 2013. The Companys policy for recording interest and penalties are based on estimates and during the year ended December 31, 2018 and 2017, the Company recorded $0 and $0, respectively, in interest and penalties.
Note J- Stockholders' Deficit
Pursuant to our Articles of Incorporation, our board has the authority, without further stockholder approval, to provide for the issuance of up to 10,000,000 shares of our preferred stock in one or more series and to determine the dividend rights, conversion rights, voting rights, rights in terms of redemption, liquidation preferences, the number of shares constituting any such series and the designation of such series. Our board has the power to afford preferences, powers and rights (including voting rights) to the holders of any preferred stock preferences, such rights and preferences being senior to the rights of holders of common stock.
During January 2017 to March 2017, 48 shareholders of the Company, who previously acquired shares of the Companys common stock, par value of $0.001 per share (the SMSA Crane Shares), in a private placement with the Company, at price of $3.31 per share, enter into an share exchange agreement with Coqui. The 48 investors agreed to exchange their SMSA Crane Shares for an equal value of shares of Coquis common stock, par value of $0.1 per share (the Coqui Shares), and Coqui agreed to proceed with the proposed share exchange. As a result, 1,663,443 SMSA Crane Shares outstanding held by these 48 shareholders and 151,300 outstanding warrants held by Pariter, the placement agent, were exchanged for Coqui Shares and warrants and the Company cancelled these SMSA Crane shares and warrants.
On May 16, 2017, the Board of Directors approved the issuance of 47,490 shares of its common shares to Coqui, based on the private placement share price of $3.31 in satisfaction for the total debt owed to Coqui of $157,194.
On June 26, 2017, our former controlling shareholder, Coqui Radio Pharmaceuticals Corp. (Coqui), sold 9,947,490 shares of common stock to Irwin Eskanos for a purchase price of $250,000. See Note B Changes of Control.
There were no common shares issued or cancelled during the year ended December 31, 2018.
There were no preferred shares issued and outstanding at December 31, 2018 and 2017. There were 10,047,495 shares of common stock with a par value $0.001 issued and outstanding as of December 31, 2018 and December 31, 2017.
Stock Warrants
The following table summarizes all warrant activity:
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Warrants
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Weighted
Average
Exercise
Price
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Weighted
Average
Remaining
Contractual
Life (Years)
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Aggregate
Intrinsic
Value
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Outstanding at December 31, 2016
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151,300
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$
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3.31
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2.25
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Granted
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Exercised
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Cancelled
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(151,300
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)
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3.31
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Outstanding at December 31, 2017
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Granted
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Exercised
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Cancelled
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Outstanding at December 31, 2018
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Exercisable at December 31, 2018
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Note K- Subsequent Events
In accordance with ASC 855-10, Company management reviewed all material events through the date of the issuance of these financial statements and determined that there are no additional material subsequent events to report, except as noted.
During October 2019, the Company received a loan of $35,000 from Mr. Irwin Eskanos, the principal shareholder of the Company, for the funding of its current operating expenses. The amount owing is unsecured, non-interest bearing, and due on demand.
F-9