10-K: My City Builders Reports Significant Loss, Sells Subsidiary

My City Builders, Inc. reported a substantial net loss for fiscal year 2025, driven by discontinued operations and the sale of its real estate subsidiary, RAC Real Estate Acquisition Corp., raising significant going concern doubts.

Summary

• My City Builders, Inc. (MYCB) reported a net loss of $498,315 for the fiscal year ended July 31, 2025, a significant decline from a net income of $25,752 in the prior year.
• The company sold 100% of its wholly-owned subsidiary, RAC Real Estate Acquisition Corp., to RAC Merger LLC (a related party) for $2,374,896 on July 8, 2025, resulting in a loss on disposal of subsidiaries of $230,730.
• Following the sale of RAC, the company briefly became a shell company but ceased to be one after acquiring 4 acres of land in Glencoe, Alabama, on October 31, 2025, for $350,000 via a secured promissory note.
• Discontinued operations, primarily from RAC, generated $391,554 in revenue in 2025 (including $121,624 from rent and $269,930 from home sales), compared to $59,300 in 2024.
• Cash and cash equivalents were critically low at $2,189 as of July 31, 2025, down from $2,550 in the prior year.
• The company's accumulated deficit increased significantly to $4,893,332 as of July 31, 2025, from $2,019,954 in 2024.
• Management's plans to raise necessary funding through equity financing arrangements may be insufficient to fund capital expenditures and working capital, raising substantial doubt about the company's ability to continue as a going concern.
• The company's common stock is a 'penny stock' trading on the OTC Pink marketplace, which may limit liquidity and make it difficult for investors to sell shares.

Sentiment

Score: 2

Explanation: The sentiment is overwhelmingly negative due to a significant net loss, substantial accumulated deficit, critically low cash, increased cash burn, and explicit 'going concern' doubts from auditors. The ineffectiveness of internal controls and reliance on related party transactions further contribute to a poor outlook, despite some operational activity and a slight improvement in working capital.

Positives

• Working capital improved from a deficiency of $(61,098) in 2024 to a positive $4,469 in 2025.
• Loss from continuing operations decreased to $(105,072) in 2025 from $(159,404) in 2024, primarily due to a reduction in operating expenses.
• The company settled a lawsuit with Fix Pads Holdings LLC in June 2024, resulting in the transfer of 44 properties, with 29 properties receiving Quitclaim Deed Certificates and renovations commencing in July 2024.
• The company is no longer considered a shell company as of October 31, 2025, following a new land acquisition for multi-family development.

Negatives

• Reported a significant net loss of $498,315 for fiscal year 2025, a substantial deterioration from the prior year's net income.
• Incurred a loss of $230,730 on the disposal of its primary operating subsidiaries, RAC Real Estate Acquisition Corp. and RAC Gadsden LLC.
• Cash balance remains extremely low at $2,189, indicating severe liquidity constraints.
• Accumulated deficit nearly doubled to $4,893,332, highlighting ongoing financial challenges.
• Negative cash flow from operating activities increased to $(504,584) in 2025 from $(483,064) in 2024.
• The company's auditors included a going concern paragraph, citing negative operating cash flow and the need for additional capital.
• Internal controls over financial reporting were deemed ineffective due to limited internal audit function, inadequate review, lack of segregation of duties, absence of full-time accounting personnel, and no independent directors.
• The common stock is a 'penny stock' with limited liquidity and potential for price manipulation.

Risks

• Inability to obtain necessary financing to develop the business, potentially leading to cessation of operations.
• Stock trading on the OTC Pink limited market, which is associated with companies facing financial reporting problems or economic distress, leading to lack of liquidity and low stock price.
• Failure to have effective internal controls over financial accounting and disclosure controls, and the high cost of developing and installing them.
• Significant dilution likely to result from any acquisitions, new management, or financing activities.
• Dependence on attracting, training, and retaining key management, technical, and financial personnel, which is challenging for a company with no history of earnings.
• The common stock being a 'penny stock' may make it difficult for investors to sell shares due to SEC regulations and broker-dealer practices.
• Limited trading market for common stock, leading to potential volatility and difficulty in selling shares at desired prices.
• Lack of a full-time chief financial officer, which could impair the ability to develop financial controls and raise capital.
• Absence of independent directors, reducing checks and balances on management and potentially hindering the development of internal controls and capital raising efforts.
• Potential for stock price volatility due to low trading volume, market perception, and various external factors.

Future Outlook

Management plans to raise necessary funding through equity financing arrangements to support capital expenditures, working capital, and other cash requirements for the fiscal year ended July 31, 2026. The company intends to commence construction on newly acquired lots in Gadsden, Alabama, by December 31, 2024, and plans to build seven to eight duplex apartments in Glencoe, Alabama, during calendar year 2025. A Phase Two construction project for up to thirty single-family Garden Homes is planned for Gadsden once the duplex apartments are completed. The company also intends to construct up to 25 multi-family units in three phases in Glencoe, starting with an 8-unit multi-family duplex development as phase one.

Management Comments

• Management's plans to raise necessary funding through equity financing arrangements may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ended July 31, 2026.
• Until the Company engages in an active business or makes an acquisition, the Company is likely not to be able to raise any significant debt or equity financing.
• The ability of the Company to begin operations in its new business model is dependent upon, among other things, obtaining financing to commence operations and develop a business plan or making an acquisition.
• The Company cannot give any assurance as to its ability to develop or acquire a business or to operate profitably.

Industry Context

My City Builders operates in the highly competitive real estate development industry, specifically targeting low-income housing. The company faces competition from REITs, institutional pension plans, other public and private real estate companies, and private real estate investors for property acquisition and capital raising. Its business model involves acquiring, refurbishing, and selling foreclosures, developing 'Land Banks,' and working with HECM pools. The recent divestiture of its primary real estate subsidiary (RAC) and subsequent re-entry into development via a new land acquisition in Glencoe, Alabama, suggests a strategic pivot or restructuring within the low-income housing segment. The company's small scale and limited resources put it at a disadvantage against larger, more established competitors with greater financial capacity and brand recognition.

Comparison to Industry Standards

• The company's financial position, characterized by a significant accumulated deficit ($4,893,332) and minimal cash ($2,189), falls far below industry standards for established real estate developers, which typically require substantial capital for projects.
• The 'going concern' qualification from auditors is a red flag, indicating a higher risk profile compared to financially stable industry peers.
• The ineffectiveness of internal controls over financial reporting, including a lack of segregation of duties and qualified accounting personnel, is a significant governance weakness not typically seen in well-managed public real estate companies.
• Operating as a 'penny stock' on the OTC Pink market places the company in a category often associated with distressed or non-compliant entities, unlike larger, more liquid real estate investment trusts (REITs) or developers listed on major exchanges.
• The extensive reliance on related party transactions for financing and debt settlement, including the sale of its primary subsidiary to a related party (RAC Merger LLC), deviates from best practices for independent corporate governance and transparency seen in global benchmarks.

Management Changes

Corporate Governance

Legal Proceedings

• RAC filed a complaint for breach of two promissory notes and for injunctive relief against Fix Pads Holdings, LLC in Miami-Dade County Florida on May 19, 2023.
• RAC filed a complaint for appointment of receiver, breach of Limited Liability Company Agreement, and breach of fiduciary duty against Fix Pads Holdings LLC, FixPads Management, LLC and RAC FixPads II, LLC on July 7, 2023.
• The lawsuits against Fix Pads Holdings LLC were settled in June 2024, with FixPads Holdings LLC agreeing to transfer the title of 44 properties to the Company.

Related Party Transactions

• On July 8, 2025, the Company sold 100% of RAC Real Estate Acquisition Corp. to RAC Merger LLC for $2,374,896. RAC Merger LLC is owned by certain shareholders, officers, and directors of the Company.
• RAC Merger LLC, as a majority shareholder, settled its $2,339,273 portion of the purchase price by assigning the RAC shares, with $35,623 remaining as a dividend payable to minority shareholders.
• During the year ended July 31, 2025, related parties advanced $1,302,700 to the Company, and the Company repaid $347,200.
• The Company settled $1,716,000 due to a related party by issuing 4,290,000 shares of common stock during the year ended July 31, 2025.
• The Company settled $2,850,000 due to a related party by issuing 11,400,000 shares of common stock during the year ended July 31, 2024.
• During the year ended July 31, 2024, one related party assigned $500,000 of their amount due from the Company to another related party.
• During the year ended July 31, 2024, one related party converted $500,000 of the amount due from the Company into four 30-year loan agreements with a 9.5% annual interest rate.
• The Company's shareholders paid operating expenses of $1,410 and $16,889 on behalf of the Company during the years ended July 31, 2025, and 2024, respectively (unsecured, due on demand, non-bearing interest advances).
• Two related parties obtained $616,100 in bank loans with collateral of five homes, with net proceeds of $263,001 transferred to the Company's bank account after settling company lines of credit and closing costs in 2025.

Stakeholder Impact

• **Shareholders:** Significant dilution from common stock issuances to related parties for debt settlement, substantial net loss, increased accumulated deficit, and 'going concern' doubts negatively impact shareholder value and investment security. The 'penny stock' status and limited liquidity further restrict their ability to exit positions.
• **Employees:** The company employs only two part-time executives, indicating limited direct impact on a broad employee base. However, the company's financial instability poses a risk to job security for these individuals.
• **Customers (Low-income housing residents/buyers):** The company's focus on low-income housing suggests a positive social impact, but its financial instability and operational challenges could affect its ability to deliver on development and maintenance commitments.
• **Suppliers/Creditors:** The company's working capital position and reliance on related party financing, coupled with 'going concern' issues, present a higher credit risk for suppliers and creditors. The secured promissory note for the Glencoe land acquisition provides some security for that specific creditor.
• **Regulatory Authorities:** The ineffectiveness of internal controls and disclosure controls, as well as the 'going concern' qualification, will likely draw scrutiny from the SEC and other regulatory bodies.

Next Steps

• Commence construction on newly acquired lots in Gadsden, Alabama, by December 31, 2024.
• Build seven to eight duplex apartments on the Glencoe, Alabama, land parcel during the calendar year 2025.
• Initiate Phase Two construction project for up to thirty single-family Garden Homes in Gadsden, Alabama, after the duplex apartments are completed.
• Construct up to 25 multi-family units in three phases in Glencoe, Alabama, starting with an 8-unit multi-family duplex development as phase one.

Key Dates

Recommendation

The company faces severe financial distress, evidenced by a substantial net loss, a rapidly increasing accumulated deficit, and critically low cash reserves. The 'going concern' warning from auditors, coupled with ineffective internal controls and extensive related party transactions, indicates fundamental operational and governance weaknesses. While the company has made efforts to restructure and acquire new land, its ability to secure necessary financing and operate profitably remains highly uncertain. The 'penny stock' status and limited liquidity further exacerbate investment risk. Given these profound challenges and the high probability of further dilution or operational failure, a seasoned investor would strongly recommend selling any existing holdings.

Keywords

Real Estate Development, Low-Income Housing, SEC Filing, 10-K, My City Builders, MYCB, RAC Real Estate Acquisition Corp, Discontinued Operations, Going Concern, Financial Performance, OTC Pink, Penny Stock, Corporate Governance, Internal Controls, Property Acquisition, Glencoe Alabama, Gadsden Alabama