Business context and reporting period
Important filing-identity discrepancy: Although the request identifies Artelo Biosciences, Inc., this 10-Q is for Knight Knox Development Corp., a Nevada shell/development-stage company. It reports the quarter and nine months ended May 31, 2015; fiscal year-end is August 31. The company says it intends to develop an online auction and classified-ad website and had conducted only minimal operations. It had generated no revenue since inception.
Financial results and liquidity
| Metric | Three months ended May 31, 2015 | Nine months ended May 31, 2015 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $2,500 | $10,650 |
| Net loss | $2,500 | $10,650 |
| Net loss per share | $0.00 (rounded) | $0.00 (rounded) |
For the nine-month period, operating cash outflow was $10,650, investing cash flow was zero, and financing provided $8,500 from common-stock sales. Cash declined $2,150 to $12,581 from $14,731 at August 31, 2014. At May 31, current assets and working capital were $12,581; the filing reports no liabilities or debt. Accumulated deficit was $25,919. Profit margins are not meaningful because there was no revenue.
Changes versus the prior comparable period
Compared with the three months ended May 31, 2014, quarterly expenses and net loss decreased from $8,150 to $2,500; management attributed the earlier period's higher expenses primarily to S-1 registration costs. Nine-month expenses and net loss decreased from $14,745 to $10,650, largely reflecting lower general and administrative expenses. Financing proceeds fell from $30,000 in the prior-year nine-month period to $8,500. The company issued 850,000 shares for cash during the current nine-month period.
Outlook, risks and unusual items
Management states that additional capital is needed to fund operations and that the company has no established revenue source. The filing identifies substantial doubt about the company's ability to continue as a going concern; it may need further equity, debt, or funding from management or significant stockholders, with no assurance funds will be available on acceptable terms. Management said a prior offering registered 8,000,000 shares at $0.01 per share, seeking up to $80,000, and described $40,000 as the minimum it believed necessary to develop the business. The filing does not clearly establish the offering's status or proceeds raised. Management projected website completion about six months after the offering and anticipated beginning to generate fees nine months after offering completion; these are plans, not assured guidance.
The company reported no commitments or contingencies and no material pending legal proceedings. It disclosed that disclosure controls and procedures were not effective as of May 31, 2015. It reported no material changes in internal control over financial reporting during the period. No off-balance-sheet arrangements were disclosed.
Important facts for investors to verify
- Confirm the issuer: the supplied filing is for Knight Knox Development Corp., not Artelo Biosciences, Inc.
- Review the going-concern warning, available cash, cash burn, and the company's ability to secure additional funding.
- Verify the offering's status, shares sold, proceeds received, and the website's actual development and launch progress.
- Reconcile share and equity figures: the balance sheet reports common stock of $6,850, while the stockholders' equity statement shows an ending common-stock amount of $13,960; the share-issuance presentation also merits clarification.
- Consider the disclosed ineffective disclosure controls when assessing the reliability of reported information.