Filing identity and period
Material metadata mismatch: The supplied filing is for Prime Estates & Developments, Inc., not Cosmos Health Inc. It is a Form 10-Q for the three months ended October 31, 2011, filed December 12, 2011—not a 2012 Q1 filing. The summary below reflects the supplied filing.
Prime Estates described itself as a development-stage company pursuing commercial real estate and related assets. It reported no completed property acquisitions or revenue-generating closings.
Financial results and condition
- Revenue: None reported for the quarter or the comparable 2010 quarter.
- Net loss: $160,385, versus $8,783 in the three months ended October 31, 2010. Basic and diluted loss per share was $0.01 versus $0.00.
- Expenses: General and administrative expenses were $159,788, up from $8,545. Related-party interest expense was $597, versus $238.
- Cash flow: Operating activities used $30,780; financing provided $19,100; cash decreased by $11,680 to $3,558. No investing cash flows were reported.
- Liquidity: Current assets were $3,558 and current liabilities were $66,108, yielding a working capital deficit of $62,550. The filing states substantial doubt exists about the company’s ability to continue as a going concern.
- Liabilities and equity: Current liabilities included $6,108 in accounts payable and accrued expenses, $55,000 in related-party accrued expenses, and a $5,000 related-party note. Shareholders’ deficit was $62,550. No long-term debt was shown.
- Margins: Not meaningful because the company reported no revenue.
- Shares: 24,637,782 shares were issued and outstanding at October 31, 2011; the cover page reports 24,684,282 as of November 28, 2011.
Changes versus the comparable period
Quarterly net loss increased by $151,602 year over year. Management attributed the higher general and administrative costs primarily to accrued GreenEra contract costs, officer and director salaries that began in April 2011, and $87,900 in non-cash compensation expense. Operating cash use increased from $9,468 to $30,780. Cash declined from $15,238 at July 31, 2011 to $3,558 at October 31, 2011.
Outlook, risks, and unusual items
- Management estimated a need for at least $120,000 over the next 12 months, in addition to funds for public-company costs, and projected a monthly burn rate of approximately $10,000. It had no specific committed funding source; future equity financing was uncertain. Management said operations might not continue if it could not raise additional funds.
- The company had no property acquisition commitments or operating revenue. Its plans to raise approximately $10 million and invest in property, including up to $1.2 million in the Brazil forest project, were conditional aspirations, not committed financing or guidance.
- The GreenEra agreement covers exploitation rights to approximately 150,000 acres of Brazilian forest and potential carbon-credit development. It calls for $5,000 monthly payments over approximately 34 years, is cancelable by Prime Estates, and requires financing for project costs of up to $1.2 million. The company reported $35,000 of accrued contract costs and no cash payments as of October 31, 2011. Certification and sale conditions could void the underlying arrangement. Two company directors were also shareholders of GreenEra.
- The company reported that disclosure controls and procedures were not effective. It reported no legal proceedings. Management cautioned that forward-looking statements could differ materially from actual results.
Important facts for investors to verify
- Confirm the issuer and reporting period: the supplied document does not match the requested Cosmos Health Inc. 2012 Q1 filing.
- Assess the going-concern warning, very limited cash, working capital deficit, and whether promised or anticipated related-party funding was actually provided.
- Verify the GreenEra contract’s continuing obligations, cancellation terms, accrued amounts, carbon-credit certification prospects, and related-party relationships.
- Reconcile the quarter-end share count with the later cover-page count and review the compensation and consulting share issuances.
- Review the reasons for ineffective disclosure controls and any remediation after the quarter.