Filing summary
Entity and period: The supplied filing is for First American Group Inc., a Nevada development-stage company, for the quarter ended December 31, 2013, filed February 10, 2014. It does not identify Loop Industries, Inc.; the company and filing-period metadata should be verified.
Business context and financial results
First American Group was developing an advertising-supported VoIP telephone service and related software. It reported no revenue in the quarter or since inception on March 11, 2010.
- Quarterly expenses and loss: Expenses and net loss were $4,598, versus $3,198 in the same quarter of 2012. Professional fees were $3,645 (prior year: $2,200); general and administrative expenses were $953 (prior year: $998). Basic and diluted loss per share was reported as $0.00.
- Cash flow: Net cash used in operating activities was $7,105, compared with $8,836 in the prior-year quarter. The company received $9,935 in related-party loan proceeds, resulting in a $2,830 increase in cash during the quarter.
- Liquidity and balance sheet: At December 31, 2013, cash was $4,852, total current liabilities were $15,057, and stockholders’ deficit was $10,205. Current liabilities included $10,260 due to a director and $4,797 in accounts payable. The director advance is unsecured, bears no interest, and is due on demand. The filing reports no interest paid.
- Margins and debt: No revenue or gross profit was reported, so margins are not meaningful. The filing discloses the related-party advance but does not provide a separate total debt figure.
Changes, outlook, and risks
- Compared with the prior-year quarter, net loss increased by $1,400; cash at quarter-end declined from $12,902 to $4,852. Related-party funding supported current-quarter cash.
- Management said cash was insufficient to begin the operating plan or cover ongoing expenses beyond approximately two months. The company had no arranged financing and warned that failure to obtain funding could prevent development and cause the business to fail. Future funding was expected principally from equity sales and loans, with potential shareholder dilution.
- Development was substantially delayed. Management said it had selected and integrated open-source VoIP and billing software, but lacked funds to hire programmers. It estimated website completion by September 2014 and forecast no sales revenue for the next nine months; revenue was projected to begin about 10–16 months after the filing, subject to development, financing, and customer demand.
- Management’s projections estimated revenue of $153,750 in year two and $460,000 in year three. These were assumptions-based projections, not reported results, and depended on product completion, customer adoption, and advertising demand.
- The financial statements state that recurring losses, no revenue, and limited cash raise substantial doubt about the company’s ability to continue as a going concern. Disclosure controls were reported ineffective as of December 31, 2013 because of a lack of segregation of duties. No material legal proceedings or subsequent events were reported.
Important facts for investors to verify
- Whether this First American Group filing is actually the intended filing for Loop Industries, Inc., and whether the requested period is correct.
- Current cash needs, financing availability, and the status and terms of director advances and other liabilities.
- Whether product development, website completion, and the stated revenue timetable were achieved; the projections are not guarantees.
- Whether disclosure-control deficiencies and going-concern uncertainty were subsequently addressed.