10-Q: My City Builders Shifts Focus to Multifamily Development

My City Builders, Inc. reported a net loss of $32,137 for the quarter ended October 31, 2025, as it transitions to multifamily housing development following the sale of its prior subsidiary.

Summary

• Net loss for the three months ended October 31, 2025, was $32,137, a decrease from $74,485 in the prior year period.
• The company sold its former operating subsidiary, RAC Real Estate Acquisition Corp., on July 8, 2025, for $2,374,896, resulting in a loss on sale of $230,730.
• Acquired 4 acres of land in Glencoe, Alabama, on October 31, 2025, for $350,000 via a secured promissory note with a related party.
• Plans to construct up to 25 multi-family units in three phases on the Glencoe property, starting with an 8-unit duplex development.
• Current cash balance is $2,099 as of October 31, 2025, down from $2,189 on July 31, 2025.
• Working capital deficiency increased to $27,668 as of October 31, 2025, from a surplus of $4,469 on July 31, 2025.
• The company raised $82,500 in gross proceeds from a private offering of 1,650,000 common shares to two accredited investors on December 1, 2025.

Sentiment

Score: 2

Explanation: The company is in a highly precarious financial position with minimal cash, no revenue, and significant capital needs. While it has a new development plan and recently raised some capital, the 'going concern' doubt and internal control weaknesses indicate severe challenges. The recent capital raise is a small fraction of what is needed.

Positives

• Net loss from continuing operations decreased to $32,137 for the three months ended October 31, 2025, from $37,817 in the prior year.
• Total net loss decreased significantly to $32,137 for the three months ended October 31, 2025, from $74,485 in the prior year, primarily due to the absence of discontinued operations losses.
• Successfully acquired 4 acres of land in Glencoe, Alabama, establishing a core asset for its new multifamily development strategy.
• Secured $82,500 in new equity financing through a private offering in December 2025.

Negatives

• The company has no revenues from continuing operations for the quarter ended October 31, 2025.
• Cash balance is critically low at $2,099 as of October 31, 2025.
• Working capital deficiency increased to $27,668 as of October 31, 2025.
• Accumulated deficit grew to $4,925,469 as of October 31, 2025.
• The company is dependent on related-party financing and advances for operating expenses.
• Disclosure controls were deemed ineffective, and material weaknesses exist in internal control over financial reporting due to limited personnel and lack of accounting expertise.

Risks

• Substantial doubt about the company's ability to continue as a going concern due to recurring losses, accumulated deficit, working capital deficiency, and dependence on external financing.
• Risk of default on the $350,000 secured promissory note if construction of the duplex development on the Glencoe property does not begin within one year of October 31, 2025, potentially leading to immediate repayment or loss of the property.
• Dependence on external and related-party financing to fund operations and development activities, with no current commitments for the required $1,250,000 in equity and construction loan.
• Absence of current revenues and uncertainty of generating future revenues until development activities commence and units are rented or sold.
• Uncertainties in construction timelines and costs, including the availability of contractors and materials.
• Reliance on a single development project (Glencoe) exposes the company to project-specific risks.
• Potential market, interest rate, and permitting risks affecting the feasibility and timing of construction.
• Material weaknesses in internal control over financial reporting, including lack of segregation of duties, insufficient accounting resources, and reliance on external consultants, which could lead to financial misstatements.
• Related-party advances for operating expenses are unsecured, non-interest-bearing, and due on demand, posing liquidity risk if withdrawn.

Future Outlook

My City Builders intends to advance its multifamily development activities during the fiscal year ended July 31, 2026, focusing on securing permits, finalizing construction budgets, engaging contractors, and preparing the Glencoe property for site work and vertical construction. Management anticipates increased operating expenditures as the company transitions from pre-development to active construction, with future revenue expected from rental income or unit sales upon successful project execution. The company needs to raise approximately $1,250,000 in equity over the next twelve months to secure a construction loan and begin development.

Management Comments

• "Management expects construction efforts for Phase I to begin prior to October 31, 2026, consistent with the development schedule tied to the land acquisition."
• "Management of the Company does not believe it falls within the definition of a shell company under Rule 405 of the Securities Act."
• "Management estimates that the Company will require approximately $125,000 over the next twelve months for legal, accounting, audit, and general corporate expenses."
• "Management believes that successful execution of the development plan will result in the Company generating future revenue either through rental income or through sales of completed units, depending on market conditions and financing availability."
• "Management plans to raise necessary funding through equity and debt financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements."
• "The Company cannot give any assurance as to the ability to develop or operate profitably."
• "Management is evaluating potential remediation measures [for internal control weaknesses], including increasing the involvement of qualified outside accounting professionals, implementing enhanced review procedures, and developing additional internal controls appropriate for the size and stage of the Company."

Industry Context

My City Builders is pivoting its strategy to focus on multifamily housing development, specifically targeting low-income housing in areas like Glencoe, Alabama. This aligns with broader industry trends addressing affordable housing shortages. However, the company is in the very early stages of this new venture, having just acquired its first development property and needing significant capital to commence construction. Its reliance on related-party financing and the absence of current revenues place it at a higher risk compared to established real estate developers with diversified project portfolios and robust funding sources.

Comparison to Industry Standards

• The company's current financial state, characterized by no revenue from continuing operations, minimal cash ($2,099), and a significant working capital deficit ($27,668), falls significantly below industry standards for active real estate development companies.
• Established real estate developers typically have substantial cash reserves, access to diverse financing, and ongoing revenue streams from existing projects or property sales/rentals.
• The stated need to raise $1,250,000 in equity within 12 months to support a construction loan for an initial 8-unit duplex development suggests a very early-stage project with high capital intensity relative to the company's current resources, unlike more mature developers who can leverage existing assets and credit lines.
• The identified material weaknesses in internal controls, including lack of segregation of duties and insufficient accounting expertise, are below best practices for publicly traded companies, regardless of size, and could hinder efficient project management and financial transparency compared to well-governed industry peers.
• The reliance on related-party financing for both property acquisition and operating expenses, with non-formalized terms for advances, deviates from standard arm's-length transactions common in the broader real estate development industry.

Corporate Governance

Related Party Transactions

• On October 31, 2025, the company acquired 4 acres of land in Glencoe, Alabama, from RAC Gadsden, LLC, in exchange for a secured promissory note of $350,000. RAC Gadsden, LLC is wholly owned by RAC Real Estate Acquisition, Corp., which is wholly owned by RAC Merger LLC, which owns 98.5% of My City Builders, Inc.
• During the three months ended October 31, 2025, related parties advanced $22,890 to the company by paying for operating expenses. These advances are unsecured, non-interest-bearing, and due on demand.
• As of October 31, 2025, and July 31, 2025, RAC Merger LLC owed the company $35,623, which is payable as a dividend to the remaining minority shareholders of the company, stemming from the sale of RAC Real Estate Acquisition Corp.

Stakeholder Impact

• Shareholders: Existing shareholders face significant dilution risk from future equity raises and uncertainty regarding the company's ability to achieve profitability and continue as a going concern. Minority shareholders received a cash distribution of $35,623 from the subsidiary sale.
• Creditors: The related-party promissory note holder (RAC Gadsden, LLC) has security over the Glencoe land, but the company's overall financial instability and potential default risk could impact other creditors.
• Employees/Management: The current management team is tasked with navigating severe financial challenges and executing a new business strategy with limited resources and internal control weaknesses.
• Customers/Tenants (Future): The successful development of low-income multifamily housing could provide much-needed affordable housing options in Glencoe, Alabama.
• Suppliers/Contractors: Future engagement with architects, engineers, and construction partners for the Glencoe project depends entirely on securing financing, posing a risk of delayed or cancelled contracts if funding is not obtained.

Next Steps

• Secure necessary permits for the Glencoe multifamily development.
• Finalize construction budgets for the Glencoe project.
• Engage additional contractors for the Glencoe project.
• Prepare the Glencoe property for site work and vertical construction.
• Obtain construction financing for the Glencoe project.
• Raise approximately $1,250,000 in equity over the next twelve months to support the construction loan.
• Remediate material weaknesses in internal control over financial reporting, including increasing involvement of qualified outside accounting professionals and implementing enhanced review procedures.

Key Dates

Recommendation

My City Builders, Inc. presents an extremely high-risk investment profile. The company has no revenue from continuing operations, a critically low cash balance of $2,099, and a growing accumulated deficit of nearly $5 million. The explicit 'substantial doubt about the Company's ability to continue as a going concern' is a severe red flag. While a new real estate development plan is in place, it is entirely dependent on raising a significant amount of capital ($1.25 million in equity plus a construction loan) for which there are no current commitments. The recent $82,500 capital raise is negligible compared to the stated needs. Furthermore, the company's disclosure of ineffective internal controls and material weaknesses, coupled with reliance on related-party financing under non-arm's-length terms, indicates significant governance and operational risks. Investors face substantial risk of capital loss and dilution without a clear path to sustainable operations or profitability.

Keywords

My City Builders, Real Estate Development, Multifamily Housing, Glencoe Alabama, SEC 10-Q, Financial Report, Going Concern, Capital Raise, Low-Income Housing, Property Acquisition, Construction Loan, Related Party Transactions