The discussion contained herein contains "forward-looking statements" that
involve risk and uncertainties. These statements may be identified by the use of
terminology such as "believes," "expects," "may," "should" or "anticipates" or
expressing this terminology negatively or similar expressions or by discussions
of strategy. Our actual results could differ materially from those discussed in
this report. The following discussion should be read in conjunction with the
financial statements and the related notes included herein as Item 8.
6
Accounting Policies and Estimates
The methods, estimates and judgments that we use in applying our critical
accounting policies have a significant impact on the results that we report in
our financial statements. Some of our accounting policies require us to make
difficult and subjective judgments, often as a result of the need to make
estimates regarding matters that are inherently uncertain. We also have other
policies that we consider key accounting policies; however, these policies
typically do not require us to make estimates or judgments that are difficult or
subjective.
We have identified the accounting policies that we consider critical in Note 1
"Nature of Business and Significant Accounting Policies" of the notes to our
financial statements included in this report.
Overview
Trailblazer Resources, Inc., formerly Energy Composites Corporation ("we," "us,"
"our," or the "Company"), a Nevada corporation, currently has no business
operations.
The Company had one operating subsidiary, ECC Corrosion, Inc. ("ECC-C"), which
was sold on October 21, 2011 due to the continuing losses that the Company had
incurred since the reverse acquisition in October 2008. Formerly known as
Advanced Fiberglass Technologies ("AFT"), ECC-C was incorporated in the state of
Wisconsin on January 1, 2005, following nearly ten years operating as M&W
Fiberglass, LLC ("M&W"). Founded in 1995 by Jamie and Jennifer Mancl, M&W was
the operating entity that developed and operated AFT's business. In January
2005, M&W transferred all operating assets and liabilities into a newly formed
S-Corporation: AFT. On September 1, 2010, AFT changed its name to ECC Corrosion,
Inc.
On October 21, 2011, the Company sold all of the stock of ECC-C to Jamie and
Jennifer Mancl and their affiliated entities (the "Mancls") in exchange for
substantially all of the Mancls' shares of the Company's common stock (the
"ECC-C Sale"). These shares were then cancelled, reducing the number of shares
issued and outstanding of the Company to 22,752,955. In addition, we changed the
name of the Company to "Trailblazer Resources, Inc." effective October 17, 2011.
Results of Operations
We currently do not generate any revenues, but incur general and administrative
expenses related to our status as a publicly-held company, such as legal,
accounting and transfer agent fees, as well as other applicable expenses such as
investor relations expenses.
General and administrative expenses
Total general and administrative expenses were $148,104 for the fiscal year
ended December 31, 2017 and $90,749 for the fiscal year ended December 31, 2016,
consisting of legal, accounting and other professional fees. The increase is due
to additional legal and accounting costs associated with efforts to become
current in the Company's SEC filings and impending merger related costs in 2017
compared to 2016.
Loss from operations
The Company's net loss from operations was $148,104 and $90,749 for the years
ended December 31, 2017 and 2016, respectively. The increase in our net loss
from operations was due to higher general and administrative costs and
consulting expenses in the current year as discussed above.
Gain on extinguishment of debt
The Company recognized a loss on extinguishment debt of $17,180 and a $38,259
gain on extinguishment of debt during the years ended December 31, 2017 and
2016, respectively. The 2017 loss occurred as a result of the conversion of
$33,041 of accrued interest for shares of company common stock with a fair value
of $50,221 and the prior gain on extinguishment of debt was related to the
conversion of certain convertible noteholders exchanging debt of $150,000 and
accrued interest of $24,453 in exchange for shares of company common stock with
an aggregate fair market value of $136,194 on the respective conversion dates in
December 2016.
7
Interest expense
Interest expense was $32,391 for the year ended December 31, 2017 compared to
$43,948 for the year ended December 31, 2016. Interest expense during 2017 and
2016 primarily consisted of accrued interest on (a) convertible promissory notes
of $24,000 and $32,730, (b) a revolving convertible note of $4,375 and $4,375,
and (c) notes payable to a related party of $4,003 and $6,843, respectively.
Income tax benefit
In 2009, the Company established a full valuation allowance against its deferred
tax assets because it was deemed more likely than not, that the net deferred tax
assets would not be realized. Since 2009, the Company has continued to record a
full valuation allowance and therefore, there is no tax provision recorded for
the years ended December 31, 2017 and 2016.
Net loss
The Company's net loss increased from $96,438 in 2016 to a loss of $197,675 in
2017 due to the factors described above.
Liquidity and Capital Resources
At December 31, 2017, the corporate shell company had no cash and a working
capital deficiency of $1,717,817.
Operating Cash Flows
Operating activities used $125,292 in cash during the 2017 fiscal year compared
to using $76,886 during the 2016 fiscal year.
Investing Cash Flows
There were no investing transactions during the years ended December 31, 2017
and 2016.
Financing Cash Flows
Financing cash flow activities for the year ended December 31, 2017 consisted of
proceeds from a promissory note of $124,943.
Financing cash flow activities for the year ended December 31, 2016 consisted
of: (1) an increase in short-term notes payable of $46,000, (2) payments on
short-term notes payable to shareholders of $25,213, and (3) an increase in
short-term notes payable, shareholder of $36,638 and investor advances of
$17,500.
Debenture Financing
From August 2008 to December 2008, we raised $6,370,000 by selling units, each
unit consisting of (i) a 3-year, 6% convertible debenture (the "Debentures")
with a conversion price of $2.50 per share (subject to adjustment for stock
splits and stock dividends), and (ii) a number of warrants equal to the number
of shares issuable upon conversion of the principal amount of the Debenture (the
"Warrants"). The Debentures sold included the issuance of 2,548,000 Warrants.
Each Warrant was originally exercisable into shares of common stock for a term
of 3 years at $5.00 per share. The Warrants also provided anti-dilution
protection for the following events: reorganization, reclassification,
consolidation, merger or sale; subdivision, combination or dividend of our
common stock. The Warrants expired June 30, 2014.
8
At December 31, 2017 and 2016, Debentures totaling $400,000 were outstanding and
currently due. Many of the remaining Debenture holders have elected to receive
interest in the form of stock, lowering our cash outlays for debt service on the
Debentures. Since the Company does not have the capital resources at this time
to repay these Debentures, we are working with the Debenture holders in an
attempt to convert them to common stock, extend or otherwise renegotiate their
terms. In December 2016, certain debenture holders converted $150,000 in
outstanding principal and $24,453 in accrued interest payable to 69,782 shares
of common stock. Additionally, 13,216 shares were issued to pay $33,041 of
accrued interest for non-converting debentures. The shares were issued in
January 2017 and consequently recorded as common stock payable as of December
31, 2016. The accrued interest expense included in accrued expenses was $124,175
and $133,217 as of December 31, 2017 and 2016, respectively.
Revolving Convertible Note Financing
On February 21, 2013, the Company established an unsecured revolving convertible
note in the amount of $250,000 with Diversified Equities Partners, LLC, a
shareholder of the Company ("DEP"). Under the terms of the note, DEP had agreed
to make loans to the Company during the three-year term of the revolving credit
commitment period. Interest accrued on the unpaid principal balance at a rate of
eight percent per annum and required quarterly payments beginning May 31, 2013;
however, none of the interest has been paid as of December 31, 2017.
During 2015, the entire $250,000 principal balance of the revolving note was
repaid, funded entirely by the proceeds of the note payable from GCS, discussed
in Note 4. Note Payable. Accrued expenses include $49,260 of interest due to
shareholders relating to this revolving convertible note as of December 31, 2017
and 2016, respectively.
Note Payable Financing
On April 15, 2015, we established a promissory note in the amount of $250,000
with Global CashSpot Corp ("GCS"). Under the terms of the promissory note, GCS
agreed to advance the Company funds up to $250,000 to fund accounting, legal and
other operating costs. The unsecured promissory note was non-interest bearing,
and repayment was to be due within 60 days following notice of demand by GCS. In
the event the Company were to enter into a business combination with GCS, the
promissory note would be deemed paid in full. In September 2015, the Company and
GCS agreed to amend the promissory note, increasing its amount to $350,000. The
borrowing amount was further increased to $515,000 and $523,500 in February and
August 2016, respectively. During the years ended December 31, 2017 and 2016,
GCS advanced $108,393 and $46,000 under the promissory note, respectively. The
balance of the notes payable are $648,443 and $523,500 as of December 31, 2017
and 2016, respectively.
Going Forward
The illiquidity and continuing losses suffered by ECC-C led to its sale to the
Mancls in exchange for their shares in the Company. This allows the Company to
potentially acquire another business operation, which hopefully will have a
greater potential for profitability. The Company will still need to convert,
extend or otherwise renegotiate the terms of the Debentures and other financings
described above. The Company is relying upon the limited funds provided from
shareholders to continue to operate as a public company in good standing while
we look for a target business. The Company anticipates that any acquisition with
a target company will be consummated primarily through the issuance of the
Company's shares of stock, as we do not have sufficient cash to use for such
purposes.
We will need to seek additional funding for our operations and ongoing general
and administrative expenses. Our current plan is to identify and evaluate
industries and business opportunities in order to identify a suitable
acquisition target for the Company. We cannot give any assurance that we will be
successful in this effort or that if a suitable acquisition target is obtained,
it will result in profitable operations nor can we give any assurances that we
will obtain adequate funding to stay in business until a suitable acquisition
target is identified.
Off-Balance Sheet Arrangements
As of December 31, 2017, we did not have any off-balance sheet arrangements.
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